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The Impact of Regulatory Policies on Risk Taking and Scale Efficiency of Commercial Banks in an Emerging Banking Sector

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  • E. Nur Özkan-Günay
  • Zeynep N. Günay
  • Gökhan Günay

Abstract

The recent global crisis has highlighted the role of prudent supervision and regulation in the financial system on both a national and a global scale. As an emerging market, the Turkish banking sector experienced the banking reform process almost a decade ago. The legal and institutional structure of the Turkish banking sector changed tremendously after the twin crises of 2000 and 2001. The aim of this study is to assess the impact of the regulatory policies on the efficiency of different-sized commercial banks in the Turkish banking sector during the period 2002-10. We implement a new approach in data envelopment analysis (DEA) that integrates lending quality and apply it to bank efficiency analysis. DEA is used to assess the long-term performance trend in the context of balance sheet and revenue approaches. Empirical results indicate that regulatory policies have a positive effect on the efficiency of banks. Large- and medium-size banks outperform medium-large and small banks. The notable finding is that the efficiency scores are much lower, and the global crisis more apparent, when nonperforming loans are integrated into the DEA Model.

Suggested Citation

  • E. Nur Özkan-Günay & Zeynep N. Günay & Gökhan Günay, 2013. "The Impact of Regulatory Policies on Risk Taking and Scale Efficiency of Commercial Banks in an Emerging Banking Sector," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S5), pages 80-98, November.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:s5:p:80-98
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    Citations

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    Cited by:

    1. Ghosh, Saibal, 2014. "Risk, capital and financial crisis," MPRA Paper 65246, University Library of Munich, Germany.
    2. Özlem O. Akdeniz & Hussein A. Abdou & Ali I. Hayek & Jacinta C. Nwachukwu & Ahmed A. Elamer & Chris Pyke, 2024. "Technical efficiency in banks: a review of methods, recent innovations and future research agenda," Review of Managerial Science, Springer, vol. 18(11), pages 3395-3456, November.
    3. RNuket Kirci Cevik & Sel Dibooglu & Ali M. Kutan, 2016. "Real and Financial Sector Studies in Central and Eastern Europe: A Review," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 66(1), pages 2-31, February.

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