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Impact of Ownership Concentration on the Profitability of the Banking Sector: The Case of Turkey

In: New Dynamics in Banking and Finance

Author

Listed:
  • Tuba Özkan

    (Atatürk University)

  • Sevgi Cengız

    (Kafkas University)

  • Mehmet Emin Karabayır

    (Kafkas University)

Abstract

Ownership density, which is one of the indicators of ownership structure, refers to the fact that the majority of the shares are held by one person or by a small number of people. As the share of the stockholder increases, the density of ownership increases, while the density of ownership decreases as the share ratio decreases.Studies examining the relationship between ownership density and profitability have found both positive and negative relationships between the two. The allegations of these studies generally center around the claim that the person or group holding the largest share makes effort to maximize self-interest, thanks to the control of power, and that indirectly this effort is reflected in the overall profitability of the company. Those who obtain the opposite results, on the other hand, claim that the person or persons who hold the majority shares protect their interests by changing profit distribution policies and that these changes indirectly have a negative effect on the general profitability of the minority shareholders and the company. In this context, this study aims to determine the impact of ownership density on the profitability of 16 Turkish commercial banks operated uninterruptedly between the 2009 and 2019 period with a data set of 187 firm-year observations. Return on assets (ROA) and return on equity (ROE) are used as proxies for profitability, and the equity share of the largest shareholder is used as a proxy for ownership density. In addition, bank age and bank size are included in the analysis as control variables and domestic/foreign ownership as a dummy variable.

Suggested Citation

  • Tuba Özkan & Sevgi Cengız & Mehmet Emin Karabayır, 2022. "Impact of Ownership Concentration on the Profitability of the Banking Sector: The Case of Turkey," Springer Proceedings in Business and Economics, in: Nesrin Özataç & Korhan K. Gökmenoğlu & Bezhan Rustamov (ed.), New Dynamics in Banking and Finance, pages 1-14, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-93725-6_1
    DOI: 10.1007/978-3-030-93725-6_1
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