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Testing the Factors that Determine the Profitability of Banks with a Dynamic Approach: Evidence from Turkey

Journal of Central Banking Theory and Practice (Podgorica), 2023, Vol.12 (1), p.225-248 [Peer Reviewed Journal]

2023. This work is published under https://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;ISSN: 2336-9205 ;ISSN: 1800-9581 ;EISSN: 2336-9205 ;DOI: 10.2478/jcbtp-2023-0010

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  • Title:
    Testing the Factors that Determine the Profitability of Banks with a Dynamic Approach: Evidence from Turkey
  • Author: Doğan, Mesut ; Yildiz, Feyyaz
  • Subjects: Bank Profitability ; Banking industry ; Banks ; Commercial banks ; Dependent variables ; Dynamic Approach ; Economic development ; Economic growth ; Financial leverage ; Financial services ; G21 ; GDP ; Generalized method of moments ; Gross Domestic Product ; Growth rate ; Interest rates ; Islamic financing ; L25 ; Liquid assets ; Profitability ; Return on assets ; Return on equity ; Turkish Banking
  • Is Part Of: Journal of Central Banking Theory and Practice (Podgorica), 2023, Vol.12 (1), p.225-248
  • Description: The present study aims to identify the internal and external factors that affect the profitability of banks operating in Turkey. For this purpose, the study used data from 23 public, private, and foreign banks, covering the period from 2007 to 2020. Two dependent variables were used as the profitability indicators of banks, namely, the Return on Equity (ROE) and the Return on Assets (ROA). In order to increase the reliability of the models developed during the study, Dynamic Generalized Method of Moments (GMM) and Fixed Effect Model (FEM) were applied. Results of the analysis indicate a positive and statistically significant relation between inflation rate and GDP growth rate, and ROA and ROE. According to the results of GMM, there was a positive relation between ROA and ROE, and 1-year and 2-year lagged ROA and ROE. This situation may be explained by the fact that profits acquired in the Turkish banking sector are steady. ROA and ROE were observed to have a positive relation with inflation rate and economic growth rate. In other words, the increase in inflation rate and GDP growth rate positively affect profitability of public, private, and foreign banks.
  • Publisher: Warsaw: De Gruyter
  • Language: English
  • Identifier: ISSN: 2336-9205
    ISSN: 1800-9581
    EISSN: 2336-9205
    DOI: 10.2478/jcbtp-2023-0010
  • Source: ProQuest Databases
    Alma/SFX Local Collection
    De Gruyter Open Access Journals
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