Liqudity-financial performance relationship in Turkish banking industry

This four-parted study aims to determine the effect of liquidity on financial performance of banking industry. In the first part of the study, bank and banking concepts, functions of banks, kinds of banks and banking in worldwide and Turkey are presented. The second part of the study discusses liquidity and financial performance in banking. In the third part of the study, a brief literature review on the effect of liquidity on financial performance is given. In the last part of the study, the effect of liquidity on financial performance of private and state-owned commercial banks operating in Turkey is analyzed via a research model. Empirical findings indicate that while liquidity statistically affects financial performance of banks negatively; the income-expenditure structure affects financial performance positively. Keywords: Liquidity, Financial Performance, Turkish Banking Industry.