Abstract
The primary purpose of this study is to investigate the internal determinants of commercial and participation banks operated profitability in Turkey over the time from 2010Q1 to 2018Q4 and recommend strategies for the robust banking system regarding The Turkish bank system. Within this context, quarterly data of 20 commercial and three participation banks were analyzed by using the fixed panel regression model. The bank performance is measured by using return on asset (ROA) and return on equity (ROE). As a result, it was found that size has a negative and significant impact on participation banks ROE and commercial banks both ROE and ROA. It was also concluded that credit risk (CR) has an adverse and significant effect on participation banks. However, non-interest income to the total asset (OFFBS) has a positive and significant impact on all bank profitability. The results also showed that the coefficient of capital adequacy for participation bank ROA is positive and significant. At the same time, its effect is negative and significant for commercial bank ROE and participation bank ROE. Finally, liquidity management is positively related to participation bank ROE. Concerning the results of the model, the commercial and participation bank profitability are associated with the bank-specific determinants. Because of this situation, bank managements and policymakers should initially focus on improving bank management, the lending policy and banking activities so the bank performance will continue in a crisis period.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsReferences
Abreu, M., & Mendes, V. (2002). Commercial bank interest margins and profitability: Evidence from.
Acaravci, S. K., & Çalim, A. E. (2013). Turkish banking sector’s profitability factors. International Journal of Economics and Financial Issues, 3(1), 27–41.
Adalı, Z., & Bari, B. (2017). Monetary policy and bank lending channel in Turkey. International Journal of Finance & Banking Studies (2147-4486), 6(2), 22–36.
Ahmad, N. H., & Ahmad, S. N. (2004). Key factors influencing credit risk of Islamic bank: A Malaysian case. The Journal of Muamalat and Islamic Finance Research, 1(1), 65–80.
Akbaş, H. E. (2012). Determinants of bank profitability: An investigation on Turkish banking sector. Öneri Dergisi, 10(37), 103–110.
Akhavein, J. D., Berger, A. N., & Humphrey, D. B. (1997). The effects of megamergers on efficiency and prices: Evidence from a bank profit function. Review of Industrial Organization, 12(1), 95–139.
Alkassim, F. A. (2005). The profitability of Islamic and conventional banking in the GCC countries: A comparative study. Journal of Review of Islamic Economics, 13(1), 5–30.
Amor-Tapia, B., Tascón, M. T., & Fanjul, J. L. (2006). Determinants of commercial banks’ residual profitability: An industry approach. https://doi.org/10.2139/ssrn.894440.
Anbar, A., & Alper, D. (2011). Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Turkey. Business and Economics Research Journal, 2(2), 139–152.
Angbazo, L. (1997). Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking. Journal of Banking & Finance, 21(1), 55–87.
Ari, A., & Cergibozan, R. (2016). The twin crises: Determinants of banking and currency crises in the Turkish economy. Emerging Markets Finance and Trade, 52(1), 123–135.
Artar, O. K. (2012). Küresel finansal krizin Türkiye’de bankacılık sektörü mali yapısına etkileri.
Ata, H. A. (2009). Kriz Sonrası Türkiye’de mevduat bankalara karlılığına etki eden faktörler. Dokuz Eylül Üniversitesi İşletme Fakültesi Dergisi, 10(2), 137–151.
Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121–136.
Baltagi, B. H., & Wu, P. X. (1999). Unequally spaced panel data regressions with AR (1) disturbances. Econometric Theory, 15(6), 814–823.
Bashir, A. H. M. (2001). Assessing the performance of Islamic banks: Some evidence from the Middle East. Topics in Middle Eastern and North African Economies, 3, 1–11.
Berger, A. N. (1995). The relationship between capital and earnings in banking. Journal of Money, Credit and Banking, 27(2), 432–456.
Bhargava, A., Franzini, L., & Narendranathan, W. (1982). Serial correlation and the fixed effects model. The Review of Economic Studies, 49(4), 533–549.
Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking & Finance, 13(1), 65–79.
Casu, B., Girardone, C., & Molyneux, P. (2006). Introduction to banking (Vol. 10). Harlow: Pearson Education.
Demirgüç-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability: Some international evidence. The World Bank Economic Review, 13(2), 379–408.
Demirgüç-Kunt, A., & Huizinga, H. (2000). Financial structure and bank profitability. World Bank Policy Research Working Paper (2430).
Demirhan, D. (2013). Effects of the recent financial crisis on the determinants of bank profitability: Case of Turkish banking industry. Journal of Yaşar University, 8(31), 5203–5228.
Diamond, D. W. (1984). Financial intermediation and delegated monitoring. The Review of Economic Studies, 51(3), 393–414.
Dietrich, A., & Wanzenried, G. (2014). The determinants of commercial banking profitability in low-, middle-, and high-income countries. The Quarterly Review of Economics and Finance, 54(3), 337–354.
Dinçer, H., Yüksel, S., & Pınarbaşı, F. (2020). Kano-based measurement of customer expectations in retail service industry using IT2 DEMATEL-QUALIFLEX. In Handbook of research on positive organizational behavior for improved workplace performance (pp. 349–370). Hershey, PA: IGI Global.
Eichengreen, B., & Gibson, H. D. (2001). Greek banking at the dawn of the new millennium. CFR Discussion Paper 2791, London.
Erdem, M. S. (2010). Turkish banking system in the face of the global crisis. International Journal of Islamic and Middle Eastern Finance and Management, 3(4), 351–362.
Erdoğan, M., & Aksoy, E. E. (2016). Banking regulation and determinants of banks’ profits: Empirical evidence from Turkey. Eurasian Journal of Business and Economics, 9(17), 109–124.
Eti, S., Kalkavan, H., Dinçer, H., & Yüksel, S. (2020). Predicting the role of Islamic banking on sustainable economic development: An analysis for Turkey with ARIMA model. In Handbook of research on creating sustainable value in the global economy (pp. 146–164). Hershey, PA: IGI Global.
Gischer, H., & Jüttner, D. J. (2001). Profitability and competition in banking markets: An aggregative cross country approach. Otto-von-Guericke-Univ. Magdeburg, Faculty of Economics and Management.
Goddard, J., Molyneux, P., & Wilson, J. O. (2004). Dynamics of growth and profitability in banking. Journal of Money, Credit and Banking, 36(6), 1069–1090.
Haron, S., & Azmi, W. N. W. (2004, December). Profitability determinants of Islamic banks: A Cointegration approach. In Electronic Version), Islamic Banking Conference, Union Arab Bank, Beirut, Lebanon (pp. 5–7).
Hassan, M. K., & Bashir, A. H. M. (2003, December). Determinants of Islamic banking profitability. In 10th ERF annual conference, Morocco (Vol. 7, pp. 2–31).
Hubbard, R. G. (1994). Is there a credit channel’ for monetary policy? (No. w4977). National Bureau of Economic Research.
Isik, O. (2017). Internal determinants of profitability of state, private and foreign owned commercial banks operating in Turkey. Journal of Economics Finance and Accounting, 4(3), 342–353.
İskenderoğlu, Ö., Karadeniz, E., & Atioğlu, E. (2012). Türk bankacılık sektöründe büyüme, büyüklük ve sermaye yapısı kararlarının karlılığa etkisinin analizi. Eskişehir Osmangazi Üniversitesi İktisadi ve İdari Bilimler Dergisi, 7(1), 291–311.
Javaid, S., Anwar, J., Zaman, K., & Ghafoor, A. (2011). Determinants of bank profitability in Pakistan: Internal factor analysis. Journal of Yasar University, 23(6), 3794–3804.
Jiang, G., Tang, N., Law, E., & Sze, A. (2003). The profitability of the banking sector in Hong Kong. Hong Kong Monetary Authority Quarterly Bulletin, 3(36), 5–14.
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3), 231–254.
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—With applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210.
Kalkavan, H., & Ersin, I. (2019). Determination of factors affecting the South East Asian crisis of 1997 probit-logit panel regression: The South East Asian crisis. In Handbook of research on global issues in financial communication and investment decision making (pp. 148–167). Hershey, PA: IGI Global.
Kaya, Y. T. (2002). Türk bankacılık sektöründe karlılığın belirleyicileri. MSPD Çalışma Raporları, BDDK Yayınları, 1–21.
Lee, C. C., Yang, S. J., & Chang, C. H. (2014). Non-interest income, profitability, and risk in banking industry: A cross-country analysis. The North American Journal of Economics and Finance, 27, 48–67.
Macit, F. (2012). Bank specific and macroeconomic determinants of profitability: Evidence from participation banks in Turkey. Economics Bulletin, 32(1), 586–595.
Masood, O., & Ashraf, M. (2012). Bank-specific and macroeconomic profitability determinants of Islamic banks. Qualitative Research in Financial Markets, 4(2/3), 255–268.
Masood, O., Aktan, B., & Chaudhary, S. (2009). An empirical study on banks profitability in the KSA: A co-integration approach. African Journal of Business Management, 3(8), 374.
Miller, S. M., & Noulas, A. G. (1997). Portfolio mix and large-bank profitability in the USA. Applied Economics, 29(4), 505–512.
Mirzaei, A., Moore, T., & Liu, G. (2013). Does market structure matter on banks’ profitability and stability? Emerging vs. advanced economies. Journal of Banking & Finance, 37(8), 2920–2937.
Mohamad, M. T., Sulaiman, A. A., Hamimah, K., & Muslim, N. (2019). The determinants of bank profitability: How Malaysian Islamic banks response to the financing risk. Advances in Social Sciences Research Journal, 6(12), 1–15.
Molyneux, P. (1993). Structure and performance in European banking. Doctoral dissertation, Prifysgol Bangor University.
Molyneux, P., & Thornton, J. (1992). Determinants of European bank profitability: A note. Journal of Banking & Finance, 16(6), 1173–1178.
Morrison, A. D., & White, L. (2005). Crises and capital requirements in banking. American Economic Review, 95(5), 1548–1572.
Obamuyi, T. M. (2013). Determinants of banks’ profitability in developing economy: Evidence from Nigeria. Organizations and Markets in Emerging Economies, 4(08), 97–111.
Ongore, V. O., & Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237–252.
Özatay, F., & Sak, G. (2002, April). The 2000–2001 financial crisis in Turkey. In Brookings trade forum (pp. 121–160). Washington, DC: Brookings Institution Press.
Ozgur, O., & Gorus, M. S. (2016). Determinants of deposit bank profitability: Evidence from Turkey. Journal of Applied Economics and Business Research, 6(3), 218–231.
Peek, J., & Rosengren, E. (1995). The capital crunch: Neither a borrower nor a lender be. Journal of Money, Credit and Banking, 27(3), 625–638.
Pomerleano, M. (2009). What is the impact of the global financial crisis on the banking system in East Asia? (No. 146). ADBI Working Paper.
Ramadan, I. Z., Kilani, Q. A., & Kaddumi, T. A. (2011). Determinants of bank profitability: Evidence from Jordan. International Journal of Academic Research, 3(4), 180–191.
Ramlall, I. (2009). Bank-specific, industry-specific and macroeconomic determinants of profitability in Taiwanese banking system: Under panel data estimation. International Research Journal of Finance and Economics, 34(2), 1450–2887.
Rhoades, S. A. (1985). Market share as a source of market power: Implications and some evidence. Journal of Economics and Business, 37(4), 343–363.
Short, B. K. (1979). The relation between commercial bank profit rates and banking concentration in Canada, Western Europe, and Japan. Journal of Banking & Finance, 3(3), 209–219.
Smirlock, M. (1985). Evidence on the (non) relationship between concentration and profitability in banking. Journal of Money, Credit and Banking, 17(1), 69–83.
Staikouras, C., & Wood, G. (2003, June). The determinants of bank profitability in Europe. In European Applied Business Research Conference, Venice (Vol. 913).
Sufian, F., & Habibullah, M. S. (2010). Does economic freedom fosters banks’ performance? Panel evidence from Malaysia. Journal of Contemporary Accounting & Economics, 6(2), 77–91.
Tan, Y., & Floros, C. (2012). Bank profitability and inflation: The case of China. Journal of Economic Studies, 39(6), 675–696.
Topak, M. S., & Talu, N. H. (2016). Internal determinants of bank profitability: Evidience from Turkish banking sector. International Journal of Economic Perspectives, 10(1), 37–49.
Wasiuzzaman, S., & Tarmizi, H. A. B. A. (2010). Profitability of Islamic banks in Malaysia: An empirical analysis. Journal of Islamic Economics, Banking and Finance, 6(4), 53–68.
Zhang, G., Zhou, S., Xia, X., Yüksel, S., Baş, H., & Dincer, H. (2020). Strategic mapping of youth unemployment with interval-valued intuitionistic hesitant fuzzy DEMATEL based on 2-tuple linguistic values. IEEE Access, 8, 25706–25721.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2020 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Adalı, Z., Uysal, M. (2020). Strategies for the Robust Banking System and the Determinants of the Commercial and Participation Banks Performance in Turkey Evidence from a Panel Data Analysis. In: Dincer, H., Yüksel, S. (eds) Strategic Priorities in Competitive Environments. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-030-45023-6_9
Download citation
DOI: https://doi.org/10.1007/978-3-030-45023-6_9
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-45022-9
Online ISBN: 978-3-030-45023-6
eBook Packages: Business and ManagementBusiness and Management (R0)