The Performance of Deposit Banks in Turkey

Abstract

This paper investigates the performance of Turkish deposit banks using Stochastic Frontier Analysis during the period from 2011 to 2018. The study also investigates the effect of four inputs and eight inefficiency effects such as banks size (small or large), ownership (state-owned or privately-owned; domestic or foreign), being established in Turkey, time, TL/active/Total active, Liquid active/Total active, Total Compensation/Number of staff. Battese and Coelli (1995) model was implemented since it is a popular method and it deals with unbalanced panel data and gives the inefficiency effects. The findings indicate that large banks show better performances than their small counterparts, being established in Turkey has a positive effect on the performance of deposit banks, paying more compensation to employees may not increase the efficiency of banks, being state-owned or privately-owned does not have a significant effect on the inefficiency and being a foreign bank decreases the inefficiency of banks. Time has a positive effect on the inefficiency of Turkish banking industry.