Yetkin ÇINAR, Gökçe Gürsel, Sevgi Eda Tuzcu

The Impacts of Diversification Strategies of Turkish Banks on Their Profitability and Risk: A Panel Data Analysis

ISSN: 0378-2921
Yayın Aralığı: 4
Başlangıç: 1943
Yayıncı: AÜ Siyasal Bilgiler Fakültesi

Öz This paper empirically analyzes the effects of product (loan), sector and income diversification strategies on the performances and risks of Turkish commercial banks over the period 2005–2016, in which 2008-2009 treated as a crisis period. Profitability is measured by Return on Assets ratio and natural logarithm of Non-performing Loans is used as a proxy of risk. We evaluate the different dimensions of diversification and using the Entropy methodology to distinguish the total diversification into related and unrelated components. Diversification is captured in three broadly defined dimensions: incomes, products and sectors. Then, we associate all dimensions of diversification with bank profitability and risk measures, across banks and in years, via panel data analyses. In this way, the paper aims to provide recent evidence for Turkish banking sector’s diversification strategies and their outcomes. Our findings indicate that, to be especially dominant on the within groups, income and product (loan) diversification increase return on assets while decreasing loan losses; sectoral diversification decreases profits, but increases risk.

Anahtar Kelimeler:

Diversification, Bank Performance, Bank Risk, Entropy Method, Panel Data Analysis

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Referans 1 Aleskerov, Fuad., Hasan Ersel and Mercan (2001), “Structural Dissimilarity in Turkish Banks 1988- 1999”, Bogazici Journal Review of Social Economic and Administrative Studies, 15 (1): 57-69.