IDEAS home Printed from https://ideas.repec.org/a/bdd/journl/v18y2024i2p135-149.html
   My bibliography  Save this article

Evaluation of the Relationship between Liquidity and Profitability in the Turkish Banking Sector Using Panel Data Analysis Method

Author

Listed:
  • Muharrem AGIRTMIS
  • Ebubekir MOLLAAHMETOGLU

Abstract

Liquidity risk and its management have recently become significant topics of focus for both the banking sector and regulatory authorities. The 2008 financial crisis and following this crisis, liquidity in banking has been of critical importance. In this context, the possible trade-off between liquidity risk based on prudence and profitability based on risk is an important research topic, for the sustainability of banking activities. In this study, the relationship between liquidity indicators and profitability indicators is evaluated using the panel data method. The models utilize quarterly data from the period 2010-2023 and include 22 deposit banks and 6 participation banks in the Turkish banking sector. The models, which separately evaluate the sector, deposit banks and participation banks, generally indicate a negative relationship between profitability indicators and the liquidity coverage ratio introduced by recent regulations. Conversely, it is concluded that there is a positive relationship between profitability indicators and the liquid asset/total asset ratio, which is a relatively old liquidity indicator that is widely used in the literature.

Suggested Citation

  • Muharrem AGIRTMIS & Ebubekir MOLLAAHMETOGLU, 2024. "Evaluation of the Relationship between Liquidity and Profitability in the Turkish Banking Sector Using Panel Data Analysis Method," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 18(2), pages 135-149.
    • Handle: RePEc:bdd:journl:v:18:y:2024:i:2:p:135-149
    as

    Download full text from publisher

    File URL: https://www.bddk.org.tr/Content/docs/bddkDergiTr/dergi_0036_04.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-434, November.
    2. Ahmed Arif & Ahmed Nauman Anees, 2012. "Liquidity risk and performance of banking system," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 20(2), pages 182-195, May.
    3. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    4. Étienne Bordeleau & Christopher Graham, 2010. "The Impact of Liquidity on Bank Profitability," Staff Working Papers 10-38, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bård Misund, 2016. "Vertical integration and value-relevance: Empirical evidence from oil and gas producers," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1264107-126, December.
    2. Bård Misund & Petter Osmundsen, 2015. "Probable Oil and Gas Reserves and Shareholder Returns: The Impact of Shale Gas," CESifo Working Paper Series 5687, CESifo.
    3. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    4. repec:ces:ifodic:v:13:y:2015:i:3:p:19173869 is not listed on IDEAS
    5. Bård Misund & Petter Osmundsen, 2017. "Valuation of proved vs. probable oil and gas reserves," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1385443-138, January.
    6. Evan, Tomáš & Holý, Vladimír, 2021. "Economic conditions for innovation: Private vs. public sector," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    7. Frank Asche & Bård Misund, 2016. "Who’s a major? A novel approach to peer group selection: Empirical evidence from oil and gas companies," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1264538-126, December.
    8. Weigerding, Michael, 2023. "Long-term liquidity effects of large-scale asset purchase programs: Evidence from the euro covered bond market," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 244-264.
    9. Misund, Bård, 2015. "Accounting for Oil and Gas Exploration Activities: A Triumph of Economics over Politics," UiS Working Papers in Economics and Finance 2015/15, University of Stavanger.
    10. Bhanu Pratap Singh Thakur & M. Kannadhasan & Vinay Goyal, 2018. "Determinants of corporate credit spread: evidence from India," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 45(1), pages 59-73, March.
    11. Weigert, Andreas & Hopf, Konstantin & Günther, Sebastian A. & Staake, Thorsten, 2022. "Heat pump inspections result in large energy savings when a pre-selection of households is performed: A promising use case of smart meter data," Energy Policy, Elsevier, vol. 169(C).
    12. Misund, Bård, 2015. "Reserves Replacement and Oil and Gas Company Shareholder returns," UiS Working Papers in Economics and Finance 2015/11, University of Stavanger.
    13. Peng, Yixing, 2015. "Three essays on biofuel, weather and corn yield," ISU General Staff Papers 201501010800005633, Iowa State University, Department of Economics.
    14. Jaroslava Heckova & Alexandra Chapcakova & Tomas Valentiny & Stela Markova & Lucia Zbihlejova, 2020. "Impact of the Selected Predictors on Cross-Border Mergers and Acquisitions in the Industry and Service Sectors," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(4), pages 171-186.
    15. Anne Musson, 2012. "The importance of the stakeholders’ involvement in building indicators. The case of environmental regulation in France," Working Papers hal-02947023, HAL.
    16. Feil, Jan-Henning & Musshoff, Oliver & Roeren-Wiemers, Tobias, 2014. "Farm level effects of policy reforms in Germany: First empirical evidence," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1036-1047.
    17. Anatolitis, Vasilios & Azanbayev, Alina & Fleck, Ann-Katrin, 2022. "How to design efficient renewable energy auctions? Empirical insights from Europe," Energy Policy, Elsevier, vol. 166(C).
    18. Jochen Wicher & Theresia Theurl, 2015. "The Positive Relationship between Institutions and the Economic Development – Evidence from a Panel Data Set of OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(03), pages 49-58, October.
    19. Tom'av{s} Evan & Vladim'ir Hol'y, 2020. "Economic Conditions for Innovation: Private vs. Public Sector," Papers 2004.07814, arXiv.org, revised Oct 2020.
    20. Jochen Wicher & Theresia Theurl, 2015. "The Positive Relationship between Institutions and the Economic Development – Evidence from a Panel Data Set of OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 13(3), pages 49-58, October.
    21. Carlos Alberto Piscarreta Pinto Ferreira, 2023. "Drivers of Sovereign Bond Demand – The Case of Japans," Working Papers REM 2023/0264, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

    More about this item

    Keywords

    Liquidity; liquidity risk; profitability; banking; panel data analysis.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdd:journl:v:18:y:2024:i:2:p:135-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sumeyye Azize CENGIZ (email available below). General contact details of provider: https://edirc.repec.org/data/bddgvtr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.