Faculty Scholarship 1994 - Present

Financial Deregulation and Total Factor Productivity Change: An Emp Study of Turkish Comm Banks

In January 1980, a new liberal economic policy was adopted in Turkey to promote financial market development and increase the efficiency and productivity of the financial sector by fostering competition among banks. As a result of this policy, the Turkish banking system witnessed a series of legal, structural, and institutional changes throughout the 1980s. To enhance their competitive viability, Turkish banks responded by streamlining their operations and investing in new technology. Utilizing a DEA-type Malmquist Total Factor Productivity Change Index, we examine productivity growth, efficiency change, and technical progress in Turkish commercial banks during the deregulation of financial markets in Turkey. We found productivity gains driven mostly be efficiency increases rather than technical progress. Efficiency increases, however, were mostly owing to improved resource management practices rather than improved scales. Our results also indicate that private banks began to close their performance gap with public banks in the new environment.