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The Effect of Scale and Mode of Ownership on the Turkish Banking Sector Financial Performance

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  • Muhammet Mercan
  • Reha Yolalan

Abstract

In this study, a financial performance index is calculated for the 1989-1998 period in order to analyze the profit generating capability of Turkish commercial banks, observe the effect of scale and mode of ownership on bank behavior and therefore bank performance. Another purpose of the study is to compare the financial performance of the time period over time. In order to construct a composite performance index, five fundamental financial ratios are selected. Assuming that these ratios are indicative of the financial performance of a bank, the Data Envelopment Analysis (DEA) which is a linear programming based technique for measuring the relative performance of organizational units is used. Since DEA method assesses the relative performance, DEA based performance index is calculated from a pool of ten years data to be able to do a meaningful comparison between years. After the DEA scores are obtained, yearly averages for all banks in the sample, yearly averages according to their mode of ownership and according to scale are calculated. Then, the average scores are compared for the considered time period.

Suggested Citation

  • Muhammet Mercan & Reha Yolalan, 2000. "The Effect of Scale and Mode of Ownership on the Turkish Banking Sector Financial Performance," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 4(15), pages 1-26.
    • Handle: RePEc:bor:iserev:v:4:y:2000:i:15:p:1-26
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    File URL: http://www.borsaistanbul.com/datum/imkbdergi/EN/ISE_Review_15.pdf
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    References listed on IDEAS

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    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    2. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
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    Cited by:

    1. E. Nur Ozkan‐Gunay & Arzu Tektas, 2006. "Efficiency Analysis Of The Turkish Banking Sector In Precrisis And Crisis Period: A Dea Approach," Contemporary Economic Policy, Western Economic Association International, vol. 24(3), pages 418-431, July.
    2. Burak Gunalp & Tuncay Celik, 2006. "Competition in the Turkish banking industry," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1335-1342.
    3. George Assaf, A. & Matousek, Roman & Tsionas, Efthymios G., 2013. "Turkish bank efficiency: Bayesian estimation with undesirable outputs," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 506-517.
    4. Akinci, Dervis Ahmet & Matousek, Roman & Radić, Nemanja & Stewart, Chris, 2013. "Monetary policy and the banking sector in Turkey," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 269-285.
    5. Erişah ARICAN & Abdurrahman ÇETİN, 2018. "A Comparative Analysis of Market Efficiency of Participation and Deposit Banks in Turkey," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 68(1), pages 45-92, June.

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