The impacts of the asymmetric information on banking system within the loan markets: ?Turkey example?

The purpose of this study is to examine the impacts of the asymmetric information on banking industry by means of explaining the asymmetric information in the loan markets which is the most important sub-branch of financial system, and the concerns arising from asymmetric information namely reverse selection, ethical danger and representation. For this purpose, our study has comparatively analyzed the assets and liabilities structure of Turkish banking industry by making use of ratios and proportions; and the existence of asymmetric information in Turkish banking industry has been examined by considering the total loan volume, non-accruing loans, interest rates and profit before tax data.In addition, the presence of asymmetric information in Turkish banking industry has been examined by testing the relation between the interest rates and non-accruing loans for the period 2001:4-2007:3. At the end of this analysis, in accordance with the results shown by asymmetric information and loan rations theory, it has been understood that an increase in the interest rates would have increased the non-accruing loans in Turkish banking industry.The aforementioned data and performed studies have shown that there had been problems arising from asymmetric information in the Turkish banking industry in the past years, however, have been reduced in great portion.Key Words: Financial markets, Loan Markets, Complete Information, Asymmetric Information, Reverse Selection, Ethical Danger, Representative Concern, Loan Rationing