The efficiency of the private commercial banking sector in turkey

Abstract

Turkey achieved important progress in terms of liberalization in the 1980s. During the liberalization process, various Turkish sectors opened up to international business, and the Turkish economy grew. One such sector is the banking sector in Turkey, which is considered in this article. More specifically, this article examines private sector commercial banks in Turkey in the period from 1990–2000 in which (1) the effects of the 1980s heavy liberalization process were first revealed; (2) most of the major foreign banks had entered the Turkish banking sector; (3) many national and global economic crises occurred; and (4) the economic crisis occurred at the end of the year 2000, which affected Turkey severely. This paper first explores the relative efficiency levels of the mentioned banks using conventional methods. Then, working from a managerial viewpoint, the author concludes that bank general managers are expected to raise or at least protect profitability and thus includes data for these individuals in a second analysis of the relative bank efficiency levels. The results indicate that annually, the relative efficiency of the sector has decreased overall irrespective of theinclusion of the data for general managers; foreign banks have displayed greater efficiency compared to domestic banks when financial efficiency is considered alone; domestic and foreign banks have the same efficiency level when the data for general managers are considered; and the annual relative efficiency figures for the sector demonstrate vast amounts of fluctuation during periods of economic crisis, again with or without the data for general managers.