Evaluating the Efficiency of Turkish Banks: A Risk and Profitability Approach

16 Pages Posted: 21 Mar 2013 Last revised: 3 Apr 2013

Date Written: March 20, 2013

Abstract

Conventional performance indicators, especially after recent financial restructuring initiatives, are criticized more than ever for not associating performance and risk. The purpose of this study is to benchmark performance of banks in comparison to risk-taking preferences, under different models with data envelopment analysis, to evaluate whether risks are reasonably priced. Comparing a bank’s risk efficiency with its competitors may provide additional insights to regulatory and supervisory authorities together with bank management. The results indicate that profitability of banks is not necessarily parallel with their risk-taking preferences. Banks with low risk efficiency should revise their business style for potential improvements.

Keywords: Risk efficiency, risk and performance, banking, data envelopment analysis, slacks-based model

JEL Classification: C14, C61, G21

Suggested Citation

Eken, Mehmet Hasan and Kale, Süleyman, Evaluating the Efficiency of Turkish Banks: A Risk and Profitability Approach (March 20, 2013). Journal of CENTRUM Cathedra: The Business and Economics Research Journal, Vol. 6, Issue 1, pp. 53-68, 2013, Available at SSRN: https://ssrn.com/abstract=2236397

Mehmet Hasan Eken (Contact Author)

TEMAR ( email )

Kosuyolu Mahallesi, Ismailpasa sokak, Kadikoy
Istanbul, 111111
Turkey

Süleyman Kale

Kırklareli University ( email )

Kepirtepe Mevkii
Lüleburgaz
Kırklareli, 39750
Turkey

HOME PAGE: http://personel.klu.edu.tr/suleymankale

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