Guray Kucukkocaoglu

Identifying the Effects of Mergers and Acquisitions on Turkish Banks Performances

Globalization has opened more capital pools of financing in emerging markets where foreign banks can now consider and engage in partnerships, mergers and acquisitions. Banks, the backbone of the financial system, intervene with mergers and acquisitions at a higher rate to better meet the considerations of the industry and the competition. All around the emerging markets, the financial sector has been carrying out acquisitions of private banks, especially in Turkey, where the post-crisis restructuring efforts include merger and acquisition opportunities and strategies for the Turkish Banking Sector. This paper aims to find the effects of mergers, acquisitions and share transfers on the performances of the Turkish Banks between 2001-2012. The Probit Model has been used to identify the performance changes of nine banks that were subject to merger and acquisition. Seven independent variables of Capital Adequacy Ratio, Fixed Assets / Total Assets, Financial Assets / Total Assets, Interest Income / Total Assets, Liquid Assets / Short-term Liabilities, Net Profit / ROA, Net Profit / ROE were used. Based on the analysis, three of the ratios: Fixed Assets / Total Assets, Interest Income / Total Assets, Liquid Assets / Short Term Liabilities decreased following the merger/acquisition in Turkish banks? financials after the merger/acquisition activity of a foreign bank.

LIQUIDITY-PROFITABILITY TRADEOFF EXISTENCE IN TURKEY: AN EMPIRICAL INVESTIGATION UNDER STRUCTURAL EQUATION MODELING

Firms in emerging markets could show a tendency to have high liquidity positions by ignoring the liquidity-profitability tradeoff in terms of working capital management due to gained experiences from stressed times. Accordingly, this study empirically examines the validity of liquidity-profitability tradeoff in Turkish market via structural equation modeling. The functions of liquidity and profitability as latent variables of the model are constituted from Piotroski’s criterias of liquidity/solvency, operating efficiency and profitability. The hypothesized model for the inexistence of the validity of liquidity-profitability tradeoff was verified and there is a moderate level of positive effect between liquidity and profitability in Turkey. The findings indicate that (1) current ratio or its variants as single-handed variables are inadequate to explain liquidity- profitability relation and (2) leverage seems to be the most important indicator as taken into account on working capital management decisions. Turkish firms apply prudent working capital management to overcome possible liquidity shocks.