Bank ownership and productivity developments: evidence from Turkey

Abstract

Purpose

This paper analyzes the responsiveness of different ownership forms to changing business environment by drawing on Turkish experience.

Design/methodology/approach

This study is conducted in two stages. In the first stage, the paper uses Malmquist index theory, to estimate the total factor productivity change, technological change, efficiency change, pure efficiency change and scale efficiency change indexes for the Turkish banks. In the second stage, utilizing the generalized least regression format, it examines the significance of the productivity differences between different ownership forms after controlling for size and changes in the macro‐economy.

Findings

Under the “traditional banking definition,” productivity growth during the period was 1.2 percent for state banks, 3.9 percent for private banks and 14.2 percent for foreign banks. Under the “non‐traditional banking definition,” the productivity gain over the period was 2.9 percent for state banks, 9.5 percent for private banks and 17.0 percent for foreign banks.

Research limitations/implications

The future research can extend the data set and may include more explanatory factors to characterize the bank forms that record the fastest productivity growth.

Practical implications

Private ownership appears to be more adaptive to new environment. Foreign banks can be used as a policy instrument to induce efficiency and productivity improvements in local banking industries. Liberalization of markets through competition boosts economic performance.

Originality/value

In analyzing impacts of reforms, the significance of inter‐temporal change should be tested to better guide regulators, investors and managers.

Citation

Isik, I. (2007), "Bank ownership and productivity developments: evidence from Turkey", Studies in Economics and Finance, Vol. 24 No. 2, pp. 115-139. https://doi.org/10.1108/10867370710756174