Eralp Bektas

East Meets West? Board Characteristics in an Emerging Market: Evidence from Turkish Banks

The presence of duality in the form of duly empowered members/executive directors is very problematic, leading to potential principal-principal conflict. Strategic investors and portfolio managers should challenge this arrangement before making sizable outlays in the Turkish financial sector. Our study shows that Turkish banks are following a number of recommended governance practices, but the prevalence of some arrangements may exacerbate principal-principal conflict. Whether this holds in other more closed sectors of the economy is an area worthy of further investigation. This study investigates the association of board independence, CEO duality, board size, and board tenure with bank performance in Turkey. These relationships are examined for all 27 Turkish banks operating in the market between the years 2001-2004. Our findings suggest that the presence of insiders has a positive impact on return on assets, while duality and board tenure are negatively associated with performance. The aim of this study is to uncover whether prescribed western style governance practices surface in the characteristics of board of directors in Turkish banks, and to see if these characteristics influence firm performance. Turkey is an emerging market drawing large amounts of foreign investment but board composition issues have rarely been analyzed.

The persistence of profits in the Turkish banking system

Most of the studies on persistency of profits investigate profit persistency in non-financial sectors. This study uses the panel data method to test for unit roots of profitability data and their persistency in the banking sector of an emerging country. Unit root hypothesis of data is rejected and concluded that in the long run persistency of profits does not exist.

The impacts of bank-specific and macroeconomic variables on the capital adequacy ratio: evidence from Islamic banks

ABSTRACT The study investigates the relationship between the capital adequacy ratio (CAR) and different bank-specific and macroeconomic variables for 28 Islamic banks. We document that there is a statistically significant positive relationship between the CAR and the bank-specific and macroeconomic variables. In particular, bank-specific variables such as ROA, ROE, leverage, credit risk and size show a strong association with the CAR, while on the macroeconomic side, inflation, market capitalization and exchange rate have an impact on the average Islamic bank in our sample study. Furthermore, we run another model (equity to assets ratio) as dependent, with similar control variables, and the results reveal that, except for inflation, all the variables that have a significant effect on the CAR also influence the equity to assets ratio.

Profitability and persistency in the service industry: the case of QISMUT+3

ABSTRACT The aim of this study is to evaluate profitability determinants and profit persistency of Islamic and conventional banks operating in top nine Islamic Finance oriented-countries that are named as QISMUT+3 (Qatar, Indonesia, Saudi Arabia, Malaysia, UAE, Turkey, Bahrain, Kuwait and Pakistan). For this purpose, it uses bank specific, market structure, and macroeconomic variables that are utilized from Orbis Bank Focus and World Bank database. To capture endogeneity problem and unobserved heterogeneity, dynamic approach is used by employing system GMM estimation. The major findings of the study show higher profit persistency of Islamic banks (IBs) than conventional banks (CBs). The results also suggest that profitability determinants of IBs and CBs are different. Concerning the risk behavior, bank capitalization and credit risk variables are more important for CBs. Crisis results attribute better resilience to Islamic banks.

Profitability Determinants of Islamic and Conventional Banks During the Global Financial Crises: The Case of Emerging Markets

This paper performs empirical analysis on determinants of profitability in Islamic and Conventional Banks. The main focus of this study is to evaluate and measure of financial performance of Islamic and conventional banks during the global financial crises in emerging market economies. To evaluate empirically performance of the banks, various financial ratios are employed. We measure performance in terms of liquidity, profitability, solvency, and efficiency. Our findings reveal that there are similarities and differences in profitability determinants of Islamic and Conventional banking firms. The cost to revenue ratio has inverse relationship with profitability indicators in both banking systems. However, there are differences in financial performances between Conventional Banks and Islamic banks which are found in overall picture of all banks in terms of net income margin.

Risk Information of Stock Market Using Quantum Potential Constraints

Stock market modeling and risk managing have recently been one of the most important topics in finance. Using a method borrowed from the statistical and Bohmian quantum mechanics, this study seeks to answer the question of how quantum potential controls the price returns. The interconnection between today’s and yesterday’s prices has led to the emergence of quantum potential describing the collective behavior of stocks returns in the various times. It is shown that, using the empirical data of some market indices, the quantum potential walls confine the variations of the price return into a definite interval where the distance between the walls can be a proxy for the risk of the relative stock index. In other words, the investigation of different return frequencies shows that the market risk increases as the distance between the potential walls increases. The magnitude of the risk is different for different indices allowing the traders to decide on their portfolio selection and their investment horizon. Our results are consistent with the behavior of the developed and emerging markets.

Measuring the Financial Stability of Islamic and Conventional Banks in Turkey

The objective of this study is to measure and compare the financial stability of Islamic and conventional banks operating in Turkey for the period of 2006–2015. The sample consists of twenty-nine banks, including five Islamic and twenty four conventional banks. The study focus on three kinds of variables: bank specific, banking sector, and macroeconomic. The study builds on quantitative tools using panel regression in which the z-score used as a proxy for financial stability. We find that financial stability for large commercial banks is less than for small commercial banks, and financial stability for large Islamic banks is less than for large commercial banks. Small Islamic banks tend to be financially more stable than large Islamic banks, large Islamic banks financial stability is less than large commercial banks, and small Islamic banks tend to be financially more stable than large Islamic banks. The major results show that the existence of a financial crisis has a negative and significant impact on financial stability of banking sector in Turkey. The findings also indicate that the bank size, loan to asset ratios, cost to income ratio, income diversity and HHI have a negative and significant impact on financial stability of banks operating in Turkey. Banks operating in Turkey with higher Islamic banks’ share have contributed effectively to improve the financial stability in turkey. The study showed that the oil prices and political stability have a negative and significant effect, while stock prices have a positive and significant effect on the financial stability of the banks operating in Turkey. Macroeconomic variables GDP and inflation have significant effects on stability, which explains the importance of financial and economic policies of the government in increasing the financial stability.

Stock Market and Banking sector Development in Turkey: Do they have the Same Impact on Economic Growth?

Abstract This article investigates the impact of financial stock market development and banking sector development on economic growth in the case of Turkey using Johansen cointegration and Granger causality tests for the period between 01:1988 and 12:2004. The results suggest that banking sector development has positive impact on economic growth and vice versa. Hence, the results lend support to both demand following and supply leading hypotheses for banking sector development and economic growth relationship. However, the results fail to yield the same conclusion for the stock market-economic growth relationship.