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Multimarket Contact, Competition, and Performance: An Application to Turkish Deposit Banks

Author

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  • Doğan Başar, Berna

    (Bolvadin Faculty of Applied Sciences, Banking and Insurance, Afyon Kocatepe University, Turkey)

  • Halil Eksi, Ibrahim

    (Faculty of Economics and Administrative Sciences, Department of Management, Gaziantep University, Turkey)

Abstract

The banking sector plays a pivotal role in financial markets, providing an ideal setting to examine multimarket contact (MMC)—a phenomenon where banks compete against the same rivals across multiple markets. This study investigates how MMC dynamics influence bank risk and performance, particularly in the context of technological advancements and the post-COVID-19 banking landscape. Using panel data from 17 deposit banks operating continuously in the Turkish banking system between 2012 and 2021, the study employs the Generalized Method of Moments (GMM) to analyze the effects of MMC. The findings indicate that MMC intensifies competition in the Turkish banking sector, leading to improved asset quality but negative impacts on profitability, overall performance, and bankruptcy risk. These results suggest that while broader market exposure enhances risk management and credit quality, heightened competition erodes profitability and financial stability. Given the increasing digitalization of banking services and the shift towards branchless banking, regulators and financial institutions should reconsider market expansion strategies, balancing competition with financial sustainability. This study contributes to the literature by offering empirical insights from an emerging market and highlighting the interplay between MMC, financial stability, and technological evolution in banking. The findings hold practical implications for policymakers, regulators, and financial institutions seeking to optimize competitive strategies while ensuring banking sector resilience.

Suggested Citation

  • Doğan Başar, Berna & Halil Eksi, Ibrahim, 2025. "Multimarket Contact, Competition, and Performance: An Application to Turkish Deposit Banks," Asian Journal of Applied Economics/ Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 32(1), pages 58-77, January-J.
    • Handle: RePEc:ris:apecjn:0110
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    More about this item

    Keywords

    banking; multimarket contact; financial performance; risk; generalized moments method (GMM);
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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