Multimarket contact, competition and performance: An application on Turkish deposit banks

Banks hold a very large share in the Turkish financial system and have extremely important functions in the economy depending on the functions they undertake. For this reason, the banking sector is one of the sectors that directs the market in terms of its effects. At the same time, the banking sector provides a very productive laboratory for testing multi-market contact, as companies offer many homogeneous products and services in various geographical markets. Multi-market contact occurs when banks face the same competitors in more than one market. This study aims to examine the effects of multimarket contacts, which are competitive dynamics, on bank risk and performance. In this context, 17 deposit banks that were continuously operating in the Turkish banking system between 2012 and 2021 were included in the research. The effects of multimarket contacts in banks on bank risk and performance were tested using the Generalized Moments Method (GMM). The results show that the process experienced in the Turkish banking sector in recent years has increased the competition between banks. In this process, it has been observed that multi-market contact has a positive effect on banks' asset quality and a negative effect on profitability, performance and risk.