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The 1994 Economic Crisis and Its Effects On Commercial Banks: An Emprical Investigation

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  • Ýhsan Ýsik

Abstract

This paper analyzes the causes and consequences of the 1994 economic crisis. Utilizing Malmquist index, it also examines productivity change in Turkish banks between 1992 and 1996 to explore its effects on banking performance. The pre and post crisis results demonstrate that bank productivity followed a V-shape pattern: hitting a dramatic level in 1994 (-17%) and bouncing back after 1994 (+15%). The major source of the productivity fall was a downward shift in production frontier (technical regress) rather than increasing distance of banks from the frontier (efficiency decrease). The further analysis by ownership indicates that foreign banks suffered the most from the crisis while state banks suffered the least.

Suggested Citation

  • Ýhsan Ýsik, 2001. "The 1994 Economic Crisis and Its Effects On Commercial Banks: An Emprical Investigation," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, vol. 5(20), pages 31-74.
    • Handle: RePEc:bor:iserev:v:5:y:2001:i:20:p:31-74
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    References listed on IDEAS

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    1. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
    2. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    3. Osman Zaim, 1995. "The Effect of Financial Liberalizationon the Efficiency of Turkish Commercial Banks," Working Papers 9505, Department of Economics, Bilkent University.
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