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Cost Efficiency, Scale Economies, and Technological Progress in Turkish Banking

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  • Adnan Kasman

Abstract

This paper uses a three input–three output Fourier-flexible cost function specification to investigate cost efficiency, scale economies, and technological progress in the Turkish banking system over the period 1988-1998. Our findings suggest that the Turkish banking system has a significant inefficiency problem. Although the annual inefficiency average decreased over the sample period due to the financial liberalization, commercial banks in the sector operated more inefficiently than their U.S. and European counterparts. The results suggest the existence of significant economies of scale for all groups in the sample and no evidence of diseconomies of scale even for larger banks. The results also indicate the existence of technological progress between 1988 and 1991.

Suggested Citation

  • Adnan Kasman, 2002. "Cost Efficiency, Scale Economies, and Technological Progress in Turkish Banking," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 2(1), pages 1-20.
  • Handle: RePEc:tcb:cebare:v:2:y:2002:i:1:p:1-20
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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2002/Volume+2-1/
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bank for International Settlements, 2006. "The banking system in emerging economies: how much progress has been made?," BIS Papers, Bank for International Settlements, number 28.
    2. Aziz Kutlar & Ali Kabasakal & Mehmet Sena Ekici, 2017. "Efficiency of commercial banks in Turkey and their comparison: application of DEA with Tobit analysis," International Journal of Mathematics in Operational Research, Inderscience Enterprises Ltd, vol. 10(1), pages 84-103.
    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. Dániel Holló & Márton Nagy, 2006. "Bank Efficiency in the Enlarged European Union," BIS Papers chapters,in: Bank for International Settlements (ed.), The banking system in emerging economies: how much progress has been made?, volume 28, pages 217-35 Bank for International Settlements.
    5. repec:mbr:jmonec:v:8:y:2013:i:4:p:99-136 is not listed on IDEAS
    6. Anca Podpiera & Jiri Podpiera, 2005. "Deteriorating Cost Efficiency in Commercial Banks Signals an Increasing Risk of Failure," Working Papers 2005/06, Czech National Bank, Research Department.
    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. Fukuyama, Hirofumi & Matousek, Roman, 2011. "Efficiency of Turkish banking: Two-stage network system. Variable returns to scale model," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(1), pages 75-91, February.
    9. Margono, Heru & Sharma, Subhash C. & Melvin II, Paul D., 2010. "Cost efficiency, economies of scale, technological progress and productivity in Indonesian banks," Journal of Asian Economics, Elsevier, vol. 21(1), pages 53-65, February.

    More about this item

    Keywords

    Cost Efficiency; Technological Progress; Fourier-Flexible Cost Function; Banking;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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