The Determinants of Banking Sector Profitability in Turkey

Article Information
Journal: Business and Economics Research Journal
Title of Article: The Determinants of Banking Sector Profitability in Turkey
Author(s): M. M. Tuncer Caliskan, Hale Kirer Silva Lecuna
Volume: 11
Number: 1
Year: 2020
Page: 161-167
ISSN: 2619-9491
DOI Number: 10.20409/berj.2020.242
Banking sector plays a crucial role in the financial system in terms of economic development of a country. The aim of this study is to investigate the determinants of the banking sector profitability in Turkey for the years between 1980 and 2017. We gather the data from the Turkish Statistical Institute (TurkStat) and The Banks Association of Turkey. In this context we use return on assets (ROA) and return on equity (ROE) as profitability indicators and form two models separately by taking them as dependent variables. We put both banking sector variables and control variables as independent variables. Within this framework we employ bank size, deposit conversion ratio, and liquidity as banking sector variables; whereas inflation rate, interest rate and exchange rate as control variables. To examine our models, we run a Regression Analysis. According to our findings, macroeconomic indicators such as inflation, interest rates and exchange rates play a significant role in shaping the performance of the banking system. However, banking sector variables such as assets, efficiency and liquidity are more crucial for profitability.

Keywords: Banking Sector, Profitability, Commercial Banks, ROA, ROE

JEL Classification: C10, C22, G10 Full Text