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Financial liberalization and banking efficiency: evidence from Turkey


  • Cevdet Denizer
  • Mustafa Dinc


  • Murat Tarimcilar


This paper examines the banking efficiency in a pre- and post-liberalization environment by drawing on the Turkish experience by using DEA. The paper also investigates the scale effect on efficiency. Our findings suggest that liberalization programs were followed by an observable decline in efficiency. Another finding of the study is that the Turkish banking system had a serious scale problem during the study period. The second part of our analysis relied on econometric methods and found that one major reason for such system-wide efficiency decline has been the growing macroeconomic instability of the Turkish economy in general and financial sector in particular. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Cevdet Denizer & Mustafa Dinc & Murat Tarimcilar, 2007. "Financial liberalization and banking efficiency: evidence from Turkey," Journal of Productivity Analysis, Springer, vol. 27(3), pages 177-195, June.
  • Handle: RePEc:kap:jproda:v:27:y:2007:i:3:p:177-195
    DOI: 10.1007/s11123-007-0035-9

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    References listed on IDEAS

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    Cited by:

    1. Sunil Kumar & Rachita Gulati, 2009. "Did efficiency of Indian public sector banks converge with banking reforms?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(1), pages 47-84, March.
    2. George Furstenberg, 2008. "Assessing the Competitiveness of International Financial Services in Particular Locations: A Survey of Methods and Perspectives," Open Economies Review, Springer, vol. 19(4), pages 539-556, September.
    3. Tecles, Patricia Langsch & Tabak, Benjamin M., 2010. "Determinants of bank efficiency: The case of Brazil," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1587-1598, December.
    4. Luo, Yun & Tanna, Sailesh & De Vita, Glauco, 2016. "Financial openness, risk and bank efficiency: Cross-country evidence," Journal of Financial Stability, Elsevier, vol. 24(C), pages 132-148.
    5. 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.
    6. repec:wsi:ijfexx:v:04:y:2017:i:02n03:n:s242478631750027x is not listed on IDEAS
    7. Hakan Güneş & Dilem Yıldırım, 2016. "Estimating Cost Efficiency of Turkish Commercial Banks under Unobserved Heterogeneity with Stochastic Frontier Models," ERC Working Papers 1603, ERC - Economic Research Center, Middle East Technical University, revised Mar 2016.
    8. Hsiao, Hsing-Chin & Chang, Hsihui & Cianci, Anna M. & Huang, Li-Hua, 2010. "First Financial Restructuring and operating efficiency: Evidence from Taiwanese commercial banks," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1461-1471, July.
    9. Darold Barnum & John Gleason, 2011. "Measuring efficiency under fixed proportion technologies," Journal of Productivity Analysis, Springer, vol. 35(3), pages 243-262, June.
    10. Yang, Chyan & Liu, Hsian-Ming, 2012. "Managerial efficiency in Taiwan bank branches: A network DEA," Economic Modelling, Elsevier, vol. 29(2), pages 450-461.
    11. Gulati, Rachita & Kumar, Sunil, 2016. "Assessing the impact of the global financial crisis on the profit efficiency of Indian banks," Economic Modelling, Elsevier, vol. 58(C), pages 167-181.
    12. Demirbag, Mehmet & McGuinness, Martina & Akin, Ahmet & Bayyurt, Nizamettin & Basti, Eyup, 2016. "The professional service firm (PSF) in a globalised economy: A study of the efficiency of securities firms in an emerging market," International Business Review, Elsevier, vol. 25(5), pages 1089-1102.
    13. Martina Chinazom Okorie & David Onyinyechi Agu, 2015. "Does Banking Sector Reform Buy Efficiency Of Banking Sector Operations? ? Evidence from Recent Nigerias Banking Sector Reforms," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(2), pages 264-278, February.

    More about this item


    Banking; Efficiency; Liberalization; Data envelopment analysis; C14; C61; G21; G28;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation


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