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The Relationship Of Banks’ Profitability And Financial Soundness Indicators: Granger Causality Analysis In Turkey

Author

Listed:
  • Sabrı Burak Arzova

    (Marmara University)

  • Bertaç Şakir Şahin

    (Yıldız Technical University)

Abstract

This study investigates the effect of financial soundness variables on bank performance in turkey. In the study, banking data and inflation at the macroeconomic level for the period 2000-2019 are used in two models. in the research model, return on assets and return on equity are included in the research model as variables representing bank performance. Capital adequacy ratio and non-performing loans are the financial soundness variables in the model. According to Granger causality analysis, there is a bidirectional causality relationship between return on assets and capital adequacy ratio. Similar relationship exists between inflation and non performing loans

Suggested Citation

  • Sabrı Burak Arzova & Bertaç Şakir Şahin, 2023. "The Relationship Of Banks’ Profitability And Financial Soundness Indicators: Granger Causality Analysis In Turkey," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 38(119), pages 61-76, April.
    • Handle: RePEc:acc:malfin:v:38:y:2023:i:119:p:61-76
    DOI: https://doi.org/10.33203/mfy.1192630
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    More about this item

    Keywords

    Financial Soundness; Bank Profit; Turkey;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G00 - Financial Economics - - General - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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