Market Discipline in Turkey Before and After the 2001 Financial Crisis

Bulut, Levent; Nal, Osman

doi:10.2202/1475-3693.1183

Cited by 2 publications

(1 citation statement)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Studies comparing financial variables before and after a financial/banking event are also abundant. For example, Bulut and Nal (2009) analyze the effectiveness of market disciplinary forces in the before and after of the 2001 Turkish banking crisis. They estimate and report results from a 2-Stage and 3-stage least squares instrumental variable regression.…”

Section: Literature Reviewmentioning

confidence: 99%

Analyzing Impact of a Crisis on Bank Financial Ratios

Nal

Cai²

2020

AFR

Self Cite

View full text Add to dashboard Cite

In this study we provide a practical framework and methodology for analyzing the effects of banking shocks (economic or financial in nature) on bank fundamentals, that avoids the use of complicated econometrics methods. For this, we focus our attention to the effects of the 2007-2008 global financial crisis on the four largest US banks and examine the variation of trends in the select financial ratios for those institutions using quarterly regulatory data running from 2002-Q4 to 2020-Q2. We start by plotting time series charts of those financial ratios for each bank and compare the before-crisis, transition and after-crisis periods. For this, we simply fit trend lines with three parameters of shift, slope, and volatility to the banking data. The shift parameter describes the level change of the variable when before- and after-crisis periods are compared. The slope parameter pronounces the difference in steepness of the trend lines, while the volatility parameter is associated with all three periods and describe the variation in the data during each period. Our results indicate that capital ratios, an important regulatory financial ratio, are higher across the board in the after-crisis period compared to before-crisis period, suggesting a positive shift. We don’t see significant changes in slope parameter for the capital ratio series leading us to suggest the use of dummy variable regression model where slope is treated as a fixed constant. We further show that pre-crisis and transition periods are characterized by higher volatilities that ultimately subside in the after-crisis period. Lastly, we conclude by suggesting that financial practitioners use the shift, slope and volatility parameters in understanding trends in financial time series data since it is easy to implement and interpret the results compared to more sophisticated econometric models.

show abstract

Section: Literature Reviewmentioning

confidence: 99%