The Strategic Implications of Asset and Liability Allocation in the Turkish Banking Industry

Abstract

This study aims to analyze whether banks' deviation from the mainstream in terms of asset and liability allocation enables them to perform better than their competition. Overall, deviation in the liability structure seems to have a significant impact on performance. In a second regression, the results obtained from the analysis of liability allocation are further examined by focusing on the effects of the deposit base on bank performance. Our analysis brings out the significance of liability allocation and of the effect of deposit strategies as a primary source of funding. The major difference of this study from the existing literature is that we focus primarily on both asset and liability allocation strategies of banks, and we further analyze the components of the liability structure to evaluate the impact of liability deviation on the banking strategy.