Skip to main content
SpringerLink
Log in

Investigating the Relationship Between Liquidity and Financial Performance in Turkish Banking Sector: A Pre and Post 2008 Financial Crisis Assessment

  • Chapter
  • First Online:
Global Financial Crisis and Its Ramifications on Capital Markets

Part of the book series: Contributions to Economics ((CE))

Abstract

This study aims to shed light on the relationship between liquidity and financial performance in Turkish banking sector by comparing pre and post 2008 financial crisis periods. Throughout this aim, a panel data covering the period of 2001.Q1–2015.Q3 for the state-owned and privately-owned deposit banks in Turkey is analyzed by Breusch and Pagan (The Review of Economic Studies 47:239–253, 1980) and Pesaran (Cambridge Working Papers in Economics, No. 435, 2004) using cross-dependency tests; cross-sectional Augmented Dickey Fuller test of Pesaran (Journal of Applied Econometrics 22:265–312, 2007); panel cointegration test of Westerlund (Journal of Applied Econometrics, 23:193–233, 2008); Augmented Mean Group estimator developed by Eberhardt and Bound (MPRA Paper, No. 17870, 2009) and panel causality test of Dumitrescu and Hurlin (Economic Modelling 29:1450–1460, 2012), respectively. Empirical findings indicate that in both pre and post crisis periods, liquidity has statistically positive effect on financial performance of Turkish banking sector. It can be concluded that the effect of 2008 financial crisis on Turkish banks has not been so severe, in terms of financial performance-liquidity relationship. Another empirical finding of the study is the existence of bi-directional causality relationship between liquidity and financial performance of Turkish banking sector, in both pre and post crisis periods.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 139.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 179.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 179.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

References

  • Agbada AO, Osuji CC (2013) The efficacy of liquidity management and banking performance in Nigeria. Int Rev Manag Bus Res 2(1):223–233

    Google Scholar 

  • Akın GG, Aysan AF, Yildiran L (2009) Transformation of the Turkish financial sector in the aftermath of the 2001 crisis. In: Onis Z, Senses F (eds) Turkey and the global economy: neo-liberal restructuring and integration in the post-crisis era. Routledge, London, pp 73–100

    Google Scholar 

  • Akyuz Y, Boratav K (2003) The making of the Turkish financial crisis. World Dev 31(9):1549–1566

    Article  Google Scholar 

  • Alp A, Ban U, Demirgunes K, Kılıc S (2010) Internal determinants of profitability in Turkish banking sector. ISE Rev 12(46):1–14

    Google Scholar 

  • Alper CE (2001) The Turkish liquidity crisis of 2000: what went wrong. Russ East Eur Financ Trade 37(6):58–80

    Google Scholar 

  • Altunbas Y, Kara A, Olgu O (2009) The Turkish banking sector and regional economic growth. In: Turkish banking. Palgrave Macmillan, London, pp 97–110

    Chapter  Google Scholar 

  • Bai J, Ng S (2001) A consistent test for conditional symmetry in time series models. J Econometr 103(1):225–258

    Article  Google Scholar 

  • Banking Regulation and Supervision Agency (BRSA) (2001a) Towards a sound Turkish banking sector. May

    Google Scholar 

  • Banking Regulation and Supervision Agency (BRSA) (2001b) Banking sector restructuring program—press release. May

    Google Scholar 

  • Bodie Z (2006) On asset-liability matching and federal deposit and pension insurance. Fed Reserv Bank St Louis Rev 88(4):323–329

    Google Scholar 

  • Bordeleau É, Graham C (2010) The impact of liquidity on bank profitability. Bank of Canada Working Paper

    Google Scholar 

  • Bourke P (1989) Concentration and other determinants of bank profitability in Europe, North America and Australia. J Bank Financ 13(1):65–79

    Article  Google Scholar 

  • Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47(1):239–253

    Article  Google Scholar 

  • Bulow JI, Geanakoplos JD, Klemperer PD (1985) Multimarket oligopoly: strategic substitutes and complements. J Polit Econ 93(3):488–511

    Article  Google Scholar 

  • Celasun O (1998) The 1994 currency crisis in Turkey. (No. 1913), World Bank, Development Research Group

    Google Scholar 

  • Choi I (2001) Unit root tests for panel data. J Int Money Financ 20(2):249–272

    Article  Google Scholar 

  • Claessens S, Kose MA, Terrones ME (2012) How do business and financial cycles interact? J Int Econ 87(1):178–190

    Article  Google Scholar 

  • Cooper R, John A (1991) Coordinating coordination failures in Keynesian models. New Keynes Econ 2:3–24

    Google Scholar 

  • Dufour M, Orhangazi O (2009) The 2000-2001 financial crisis in Turkey: a crisis for whom? Rev Polit Econ 21(1):101–122

    Article  Google Scholar 

  • Dumitrescu EI, Hurlin C (2012) Testing for Granger non-causality in heterogeneous panels. Econ Model 29(4):1450–1460

    Article  Google Scholar 

  • Eberhardt M, Bond S (2009) Cross-section dependence in nonstationary panel models: a novel estimator. MPRA Paper, No. 17870

    Google Scholar 

  • Eberhardt M, Teal F (2010) Productivity analysis in global manufacturing production. Department of Economics, University of Oxford

    Google Scholar 

  • Eken MH, Selimler H, Kale S, Ulusoy V (2012) The effects of global financial crisis on the behavior of European banks: a risk and profitability analysis approach. ACRN J Financ Risk Pers 1(2):17–42

    Google Scholar 

  • Global Association of Risk Professionals (GARP) (2013) Liquidity risk management overview and practitioner’s challenges of commercial banks, Dubai

    Google Scholar 

  • Goddard J, Molyneux P, Wilson JO (2004) The profitability of European banks: a cross‐sectional and dynamic panel analysis. Manchester Sch 72(3):363–381

    Article  Google Scholar 

  • Gormez Y (2008) Banking in Turkey: history and evolution, No. 83. Bank of Greece, Economic Research Department—Special Studies Division

    Google Scholar 

  • Granger CW (1969) Investigating causal relations by econometric models and cross-spectral methods. Econometrica 37:424–438

    Article  Google Scholar 

  • Growe G, DeBruine M, Lee JY, Tudón Maldonado JF (2014) The profitability and performance measurement of US regional banks using the predictive focus of the “fundamental analysis research”. Adv Manag Acc 24:189–237

    Article  Google Scholar 

  • Hadri K (2000) Testing for stationarity in heterogeneous panel data. Econometr J 3(2):148–161

    Article  Google Scholar 

  • Hurlin C, Mignon V (2007) Second generation panel unit root tests. https://halshs.archives-ouvertes.fr-halshs/00159842

  • Im KS, Pesaran MH, Shin Y (1997) Testing for unit roots in heterogeneous panels. Department of Applied Economics, University of Cambridge. Mimeo

    Google Scholar 

  • Im KS, Pesaran MH, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Econometr 115(1):53–74

    Article  Google Scholar 

  • International Monetary Fund (IMF) (2002) Financial soundness indicators: analytical aspects and country practices. Occasional Paper 212, Washington

    Google Scholar 

  • Kalkan S (2010) Did Turkey’s economy recover from the crisis? Did we out-compete rivals? TEPAV Policy Note, September

    Google Scholar 

  • Kılınc M, Kılınc Z, Turhan MI (2012) Resilience of the Turkish economy during the global financial crisis of 2008. Emerg Market Financ Trade 48(5):19–34

    Google Scholar 

  • Kosmidou K (2008) The determinants of banks’ profits in Greece during the period of EU financial integration. Manag Financ 34(3):146–159

    Google Scholar 

  • Kurawa JM, Abubakar A (2014) An evaluation of the impact of liquidity on the profitability of Nigerian banks. J Manag 2(7):1–7

    Google Scholar 

  • Lartey VC, Antwi S, Boadi EK (2013) The relationship between liquidity and profitability of listed banks in Ghana. Int J Bus Soc Sci 4(3):48–56

    Google Scholar 

  • Lee CC, Hsieh MF (2013) The impact of bank capital on profitability and risk in Asian banking. J Int Money Financ 32:251–281

    Article  Google Scholar 

  • Levin A, Lin CF (1992) Unit root test in panel data: asymptotic and finite sample properties. University of California at San Diego. Economics Working Paper Series 92&23, Department of Economics, UC San Diego

    Google Scholar 

  • Levin A, Lin CF (1993) Unit root in panel data: new results. University of California, San Diego, Working Paper

    Google Scholar 

  • Levin A, Lin CF, Chu CSJ (2002) Unit root tests in panel data: asymptotic and finite-sample properties. J Econometr 108(1):1–24

    Article  Google Scholar 

  • Maddala GS, Wu S (1999) A comparative study of unit root tests with panel data and a new simple test. Oxf Bull Econ Stat 61(S1):631–652

    Article  Google Scholar 

  • Marozva G (2015) Liquidity and bank performance. Int Bus Econ Res J 14(3):453

    Google Scholar 

  • McCord R, Prescott ES, Sablik T (2015) Explaining the decline in the number of banks since the Great Recession. Richmond Fed Economic Brief, (March), pp 1–5

    Google Scholar 

  • Molyneux P, Thornton J (1992) Determinants of European bank profitability: a note. J Bank Financ 16(6):1173–1178

    Article  Google Scholar 

  • Moon HR, Perron B (2004) Testing for a unit root in panels with dynamic factors. J Econometr 122(1):81–126

    Article  Google Scholar 

  • Mora N (2010) Can banks provide liquidity in a financial crisis? Econ Rev Fed Reserv Bank Kans City 2010:31–68

    Google Scholar 

  • Nazlioglu S, Lebe F, Kayhan S (2011) Nuclear energy consumption and economic growth in OECD countries: cross-sectionally dependent heterogeneous panel causality analysis. Energy Policy 39(10):6615–6621

    Article  Google Scholar 

  • Newey WK, West KD (1987) A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix. Econometrica 55(3):703–708

    Article  Google Scholar 

  • O’Connell PG (1998) The overvaluation of purchasing power parity. J Int Econ 44(1):1–19

    Article  Google Scholar 

  • Ozkan-Gunay E, Tektas A (2006) Efficiency analysis of the Turkish banking sector in pre-crisis and crisis period: a DEA approach. Contemp Econ Pol 24(3):418–431

    Article  Google Scholar 

  • Pedroni P (2007) Social capital, barriers to production and capital shares: implications for the importance of parameter heterogeneity from a nonstationary panel approach. J Appl Econometr 22(2):429–451

    Article  Google Scholar 

  • Pesaran MH (2003) A simple panel unit root test in the presence of cross‐section dependence. University of South California, Mimeo

    Google Scholar 

  • Pesaran MH (2004) General diagnostic tests for cross section dependence in panels. Cambridge Working Papers in Economics, No. 435

    Google Scholar 

  • Pesaran MH (2007) A simple panel unit root test in the presence of cross‐section dependence. J Appl Econometr 22(2):265–312

    Article  Google Scholar 

  • Pesaran MH, Smith R (1995) Estimating long-run relationships from dynamic heterogeneous panels. J Econometr 68(1):79–113

    Article  Google Scholar 

  • Pesaran MH, Yamagata T (2008) Testing slope homogeneity in large panels. J Econometr 142(1):50–93

    Article  Google Scholar 

  • Phillips PC, Sul D (2003) Dynamic panel estimation and homogeneity testing under cross section dependence. Econometr J 6(1):217–259

    Article  Google Scholar 

  • Poposka K, Trpkoski M (2013) Secondary model for bank profitability management—test on the case of Macedonian banking sector. Res J Financ Acc 4(6):216–225

    Google Scholar 

  • Reinhart CM, Rogoff K (2009) This time is different. Eight centuries of financial folly. Princeton University, Princeton

    Google Scholar 

  • Shen CH, Chen YK, Kao LF, Yeh CY (2009) Bank liquidity risk and performance. In: 17th Conference on the theories and practices of securities and financial markets, Hsi-Tze Bay, Kaohsiung, Taiwan, Jun 2009

    Google Scholar 

  • Swamy PA (1970) Efficient inference in a random coefficient regression model. Econometrica 38:311–323

    Article  Google Scholar 

  • The Banks Association of Turkey (2002–2015) Banks in Turkey

    Google Scholar 

  • The Banks Association of Turkey (2009, October) The financial system and banking sector in Turkey

    Google Scholar 

  • Turkish Statistical Institution (TUIK) (2008–2009) Gross domestic product and Manufacturing industry tendency statistics

    Google Scholar 

  • Westerlund J (2008) Panel cointegration tests of the Fisher effect. J Appl Econometr 23(2):193–233

    Article  Google Scholar 

  • Yeldan E (2007) Patterns of adjustment under the age of finance: the case of Turkey as a peripheral agent of neoliberal globalization. PERI Working Papers, 86

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Faculty of Economics and Administrative Sciences, Department of Business, Ahi Evran University, Bagbasi Campus, 40100, Kırsehir, Turkey

    Kartal Demirgunes

  2. Faculty of Economics and Administrative Sciences, Department of Economics, Ahi Evran University, Bagbasi Campus, 40100, Kırsehir, Turkey

    Gulbahar Ucler

Authors
  1. Kartal Demirgunes
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Gulbahar Ucler
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Kartal Demirgunes .

Editor information

Editors and Affiliations

  1. Istanbul Medipol University, Istanbul, Turkey

    Ümit Hacioğlu

  2. Istanbul Medipol University, Istanbul, Turkey

    Hasan Dinçer

Rights and permissions

Reprints and permissions

Copyright information

© 2017 Springer International Publishing AG

About this chapter

Cite this chapter

Demirgunes, K., Ucler, G. (2017). Investigating the Relationship Between Liquidity and Financial Performance in Turkish Banking Sector: A Pre and Post 2008 Financial Crisis Assessment. In: Hacioğlu, Ü., Dinçer, H. (eds) Global Financial Crisis and Its Ramifications on Capital Markets. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-47021-4_25

Download citation

Publish with us

Policies and ethics

Search

Navigation