CROSS-BORDER LOAN LIABILITY, THE EXCHANGE RATE AND PROFITABILITY IN THE TURKISH BANKING SECTOR

Authors : Gökhan ÖVENÇ, Resul AYDEMİR

Pages : 51-68

Doi:10.14780/muiibd.434951

View : 178 | Download : 16

Publication Date : 2018-06-27

Article Type : Research Paper

Abstract :We examine how the cross border banking loan liabilities insert ignore into journalissuearticles values(syndication and securitization loans); and the exchange rate affect the Turkish banking industry profitability using a balanced panel data for the period 2003Q1-2016Q3. We study with different subsamples and model specifications. Overall, we find that the banking sector financial inflows are positively associated with bank profitability. Specifically, the results show that the banking sector cross border inflows have significant and positive impact on return on assets insert ignore into journalissuearticles values(ROA);, return on equity insert ignore into journalissuearticles values(ROE); and on net interest margin insert ignore into journalissuearticles values(NIM);. The long-term inflows play a more important role than the short-term inflows in explaining profitability in all specifications while short-term inflows have no any significant effect on these profitability indicators. Moreover, we show that the exchange rate has significant and negative impact on ROA and ROE and has insignificant effect on NIM. Our findings are more notable in private banks compared to the whole sample. Given the fact that the existing studies examine the banking profitability through aggregate capital inflows and maturity mismatch, this study will fill a meaningful gap in emerging market literature.
Keywords : Cross Border Banking Liability, Long term Liability, Short term Liability, The Exchange Rate, Bank Profitability, Net Interest Margin, Return on Asset