Measuring Banking Efficiency in the Pre- and Post-Liberalization Environment : Evidence from the Turkish Banking System

Measuring Banking Efficiency in the Pre- and Post-Liberalization Environment : Evidence from the Turkish Banking System

The authors examine banking efficiency before and after liberalization, drawing on Turkey's experience. They also investigate the scale effect on efficiency by type of ownership. Their findings suggest that liberalization programs were followed by an observable decline in efficiency, not an improvement. During the study period Turkish banks did not operate at the optimum scale. Another unexpected result was that efficiency was no different between state-owned and privately owned banks. Banks that were privately owned or foreign owned had been expected to respond better to liberalization, because they were smaller and more dynamically structured, but they were no more efficient than state-owned banks. One reason for the systemwide decline in efficiency might have been the general increase in macroeconomic instability during the period studied.

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Bibliographic Details
Main Authors: Denizer, Cevdet A., Dinc, Mustafa, Tarimcilar, Murat
Language:English
en_US
Published: World Bank, Washington, DC 2000-11
Subjects:AVERAGE PRODUCTIVITY, BANK PERFORMANCE, BANK REGULATION, BANKING INDUSTRY, BANKING SECTOR, BANKING SECTOR REFORMS, BANKING SYSTEM, BANKING SYSTEMS, BANKING THEORY, BANKS, CAPITAL ADEQUACY, CAPITAL FLOWS, COMMERCIAL BANKS, CONSTANT RETURNS TO SCALE, DATA ENVELOPMENT ANALYSIS, DEPOSIT INSURANCE, DEPOSIT INSURANCE SCHEMES, DEPOSITORS, DEPOSITS, DEREGULATION, DEVELOPMENT STRATEGY, ECONOMIC GROWTH, ECONOMIC POLICIES, FINANCIAL ASSETS, FINANCIAL INSTITUTIONS, FINANCIAL LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL REFORMS, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL SYSTEMS, FOREIGN BANKS, FOREIGN COMPETITION, FUTURE RESEARCH, GLOBALIZATION, GLOBALIZATION OF FINANCIAL MARKETS, GOVERNMENT SECURITIES, GUIDELINES, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INDUSTRIALIZED COUNTRIES, INEFFICIENCY, INSURANCE, INTEREST INCOME, INTEREST RATE, INTEREST RATES, INTERNATIONAL TRADE, LIQUIDITY, MATHEMATICAL PROGRAMMING, MERGERS, MULTIPLIERS, OPERATING EXPENDITURES, OPERATING EXPENSES, OPTIMIZATION, ORGANIZATIONAL STRUCTURE, OWNERSHIP STRUCTURE, PERFORMANCE ANALYSIS, POLITICAL INTERFERENCE, PRIVATE BANKS, PRODUCTION FUNCTION, PRODUCTION TECHNOLOGY, PRODUCTIVITY, PROFITABILITY, RETURNS TO SCALE, RISK MANAGEMENT, SAVINGS, SCALE EFFECT, SECURITIES, SOLVENCY, STATE BANKS, STATE OWNED BANKS, STRUCTURAL ADJUSTMENT, TIME SERIES, TRANSITION ECONOMIES,
Online Access:http://documents.worldbank.org/curated/en/2000/11/717463/measuring-banking-efficiency-pre--post-liberalization-environment-evidence-turkish-banking-system
https://hdl.handle.net/10986/19767
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Summary:The authors examine banking efficiency before and after liberalization, drawing on Turkey's experience. They also investigate the scale effect on efficiency by type of ownership. Their findings suggest that liberalization programs were followed by an observable decline in efficiency, not an improvement. During the study period Turkish banks did not operate at the optimum scale. Another unexpected result was that efficiency was no different between state-owned and privately owned banks. Banks that were privately owned or foreign owned had been expected to respond better to liberalization, because they were smaller and more dynamically structured, but they were no more efficient than state-owned banks. One reason for the systemwide decline in efficiency might have been the general increase in macroeconomic instability during the period studied.

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