An Empirical Analysis of Bank-Specific and Macroeconomic Drivers Influencing Net Interest Margins of Turkish Listed Banks: Panel Data Evidence from Post-Crisis Era

Abstract

The aim of this study is to explore both the bank-specific and macroeconomic drivers of net interest margins using panel data techniques for a sample of 12 deposit banks publicly traded on the Borsa Istanbul over the post-crisis period 2010-2015. Our panel data results suggest that while bank size and managerial efficiency affect net interest margins negatively and significantly, operating cost, credit risk, and implicit interest payments influence the NIMs positively and significantly in the postcrisis era. The results also imply that macroeconomic indicators such as economic growth and inflation do not have any significant effects on the NIMs.

Diversification, Industry Concentration, and Bank Margins: Empirical Evidence from an Emerging South Asian Economy

“…Findings are consistent with the extended dealership model proposed by Maudos and Solís (2009), who incorporated the bank's production function operating costs related to bank services by considering operating cost as a factor for stating the argument that operating cost needs to be covered even if the market power or risk of any kind is absent. The results are consistent with empirical studies that concluded that operational cost and bank margins are positively associated (Amuakwa-Mensah & Marbuah, 2015;Entrop et al, 2015;Fungáčová & Poghosyan, 2011;Işik & Belke, 2017;Lee & Isa, 2017;Nguyen, 2012;Poghosyan, 2013;Sun et al, 2014;Tarus et al, 2012).…”

“…Several studies found a positive association of the capitalization ratio with bank margins (Amuakwa-Mensah & Marbuah, 2015; Angbazo, 1997;Asmar, 2018;Ben Naceur & Goaied, 2008;Doliente, 2005;Fungáčová & Poghosyan, 2011;Hijazeen, 2017;Lee & Isa, 2017;Maudos & Solís, 2009;Raharjo et al, 2014;Saunders & Schumacher, 2000;Williams, 2007), whereas Zhou and Wong (2008) and Gunter, Krenn, and Sigmund (2013) found a negative relationship with bank margins. Khawaja and Ud Din (2007), in the Pakistani context, and Işik and Belke (2017) in the Turkish context found the relationship to be insignificant.…”

“…Several studies have found the operating cost as the most important factor that influences bank margins (Amuakwa-Mensah & Marbuah, 2015;Fungáčová & Poghosyan, 2011;Maudos & Solís, 2009;Sun, Hassan, Hassan, & Ramadilli, 2014). Majority of studies concluded that operational cost and bank margins are positively associated (Amuakwa-Mensah & Marbuah, 2015;Entrop, Memmel, Ruprecht, & Wilkens, 2015;Fungáčová & Poghosyan, 2011;Işik & Belke, 2017;Lee & Isa, 2017;Nassar, Martinez, & Pineda, 2017;Nguyen, 2012;Poghosyan, 2013;Sun et al, 2014;Tarus, Chekol, & Mutwol, 2012).…”

“…The majority of studies reveal lower bank margins for efficient banks (Ahokpossi, 2013;Angbazo, 1997;Chortareas, Garza-García, & Girardone, 2012;Dumičić & Rizdak, 2013;Hijazeen, 2017;Işik & Belke, 2017;Lee & Isa, 2017;Maudos & De Guevara, 2004;Maudos & Solís, 2009;Sun et al, 2014;Sun et al, 2017;Williams, 2007;Zhou & Wong, 2008).…”

“…Several empirical studies found a positive association of the opportunity cost of reserves with bank margin because, with an increase in the volume of reserves, the opportunity cost is increased, so does an interest margin (Maudos & De Guevara, 2004;Zhou & Wong, 2008). Several studies also indicate an insignificant relationship between opportunity cost and bank margins (Entrop et al, 2015;Hijazeen, 2017;Işik & Belke, 2017;Lee & Isa, 2017;Maudos & Solís, 2009).…”