The effects of direct investments on the profitability of selected banks

The low capital factor in underdeveloped countries puts these countries in economic development efforts. Countries that want to maintain their status and minimize their risks in the increasingly globalized world, find the opportunity to invest in less developed countries by taking advantage of the free market economy. Foreign capital investments concern a large part of the country's economy in terms of external impact and macroeconomics. On the other hand, banks are important financial intermediaries that shape an economy. With the brokerage services they offer, they increase the supply and demand of funds in the market. The profitability of the banking sector is important in terms of economic structure. In this study, it is aimed to determine the effect of foreign direct investments (FDI) on the profitability of selected banks operating in the Turkish banking sector. In this sense, the data of 3 banks operating between 2005 and 2019 with different capital ownership were analyzed. The data were prepared from banks' balance sheets and income statements. Banks were selected from deposit banks based on the financial data of the third quarter of 2019, including public, private and foreign capital banks with the largest asset size. Time series were used as analysis method in the study. Net interest margin, asset profitability, and equity profitability as the criteria that determine bank profitability were the dependent variables of the study. In addition to the total foreign direct investment (TFDI) variable, bank-specific (internal) and macroeconomic (external) factors affecting bank profitability are also included in the analysis. The total assets of the banks were chosen as internal factors, which were thought to have an impact on bank profitability, and general price level, real interest rates, real gross domestic product ratios were chosen as macroeconomic factors. In the study, stationary tests of the variables were measured by performing Kwiatkowski Phillips Schmidt Shin (KPSS) and Augmented Dickey Fuller (ADF) unit root tests. The analysis was concluded with the Autoregressive Distributed Lag Bound (ARDL) approach for the relationship between differently integrated variables. Foreign direct investments have positive effects on the banks' return on assets and return on equity. and have a negative effect on banks' net interest margin.