INTERNAL DETERMINANTS OF PROFITABILITY OF STATE, PRIVATE AND FOREIGN OWNED COMMERCIAL BANKS OPERATING IN TURKEY

Year 2017, , 342 - 353, 30.09.2017

Ozcan Isik

https://doi.org/10.17261/Pressacademia.2017.701

Abstract

Purpose - The purpose of this study is to identify the internal
determinants affecting profitability of 26 commercial banks (i.e. state,
private, and foreign banks) in Turkey.

Methodology- Fixed and
random effects panel data estimation techniques are employed to evaluate the
impact of various internal determinants on bank profitability in Turkish banks
having different ownership structures. The estimates are based on quarterly
data over the period 2009Q1-2016Q3.

Findings- Estimation results generally
indicate that bank profitability (i.e. return on assets) is positively affected
by variables such as income diversification, deposit level, bank scale, and bank
stability, but negatively influenced by variables representing credit risk,
lending level, operating expenses, and capital adequacy.

Conclusion- Bank
profitability is affected by all bank-specific variables. However, when the sample
is divided into three groups according to the ownership structure, the findings
show that the effects of the bank-specific variables differ according to the
bank ownership structure.

Keywords

Turkish banking sector, commercial banks, internal determinants of profitability, panel data analysis, Turkey

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