IDEAS home Printed from
   My bibliography  Save this paper

Profitability, Saving and Investment of Non-Financial Firms in Turkey


  • Erdal Ozmen
  • Saygin Sahinoz
  • Cihan Yalcin


How investment is financed matters a great deal to growth, especially in countries like Turkey, where domestic savings are low and financial systems are not deep enough in supplying the funds needed for growth-generating corporate investment. In these countries there is a close link between selfgenerated corporate savings and investment activity, since access to external funds may be difficult, especially for firms that have little to offer in the way of collateral. When the funds available in the financial system are limited and there is a high external finance premium, corporate savings become even more important to fixed investment. This study analyzes the determinants of corporate savings and whether they enhance investment and ultimately growth. Empirical analysis of data from listed firms shows that in Turkey the savings of nonfinancial firms as a percent of net sales are lower than those of nonfinancial firms in major developing countries. In addition, the financial sector in Turkey is far from adept at attracting savings and mobilizing funds for firms that have to depend on external financing. In fact, the ratio of commercial credits extended to bank dependent firms to GDP is not high even though it has been increasing in recent years. These two factors are the main barriers to investment by nonfinancial firms. In other words, investment activity of financial firms proves to be highly sensitive to cash flows, which suggests that financially constrained firms invest less and thus grew slowly. In many countries corporate savings constitute about half of total savings. Policies that encourage efforts to raise corporate savings can enhance both investment and economic growth. The results of dynamic panel data regressions suggest that both firm-specific and macroeconomic variables explain savings of non-financial firms. For instance, firms’ saving rates seem to increase significantly with profitability, firm size, Tobin’s q, the GDP growth rate, and financial depth. They decline significantly with the ratio of tangible to total assets, the leverage ratio, the ratio of public debt to GDP, and real exchange rate appreciation.

Suggested Citation

  • Erdal Ozmen & Saygin Sahinoz & Cihan Yalcin, 2012. "Profitability, Saving and Investment of Non-Financial Firms in Turkey," Working Papers 1214, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1214

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Hamza Demircan & Sumru Oz, 2017. "Saving Behavior of Non-Financial Firms in Turkey," Koç University-TUSIAD Economic Research Forum Working Papers 1720, Koc University-TUSIAD Economic Research Forum.
    2. International Monetary Fund, 2016. "Turkey; Selected Issue," IMF Staff Country Reports 16/105, International Monetary Fund.

    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tcb:wpaper:1214. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ozlem Ekmekciler Ramalho Rocha) or (Ilker Cakar). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.