Examination of macro and micro economic factors affecting bank profitability, capital structure and risk level: The example of selected Turkic states

Banks have a very important share in the financial system, and they are important in both the economic and political development of countries. The services and facilities provided by banks in important transactions, from exports to imports, from monetary policy to securities markets, are clearly visible. However, their role in a country's financial system and economic structure is always important. The main purpose of this study is to examine the macro- and microeconomic factors affecting bank profitability, capital structure, and risk level in the banking systems of selected Turkic states. The countries included in the analysis were determined to be Turkey, Azerbaijan, Kazakhstan, Kyrgyzstan, and Uzbekistan, respectively. In this context, the main question of the study is whether the banking system in these countries is affected by the factors mentioned in a similar or different way. In the study, as macroeconomic variables, economic growth, deposit interest rates, and inflation rates; and as microeconomic variables, current ratio, cash ratio, leverage ratio, financing ratio, debt-equity ratio, financial profitability, economic profitability, current asset profitability, and number of interest earnings are included in the analysis. Twenty banks from Turkey, 17 banks from Azerbaijan, 15 banks from Kazakhstan, 11 banks from Kyrgyzstan, and 10 banks from Uzbekistan were included in the analysis. The number of banks selected for each country represents more than 50% of the overall banking systems of those countries. For the analysis, 18 models were created, and a total of 11 variables were used. Financial profitability to represent profitability structure, leverage ratios to represent risk structure, and debt-equity ratios to represent capital structure. A total of 18 models were established under these titles, and six models were established under each title. In the study, panel data analysis was used to measure the relationship between variables. At the end of the study, as a result of the analysis obtained within the framework of the profitability model, the 1% change that will occur on the debt-to-capital ratio affects the general model by approximately 5%. Likewise, 1% changes in economic profitability and current asset profitability variables will cause the general model to change approximately five to six times. According to the result obtained from the general model established for the risk structure, it is seen that all the variables except the economic rentability and inflation variables show significance. The variable with the greatest influence is current asset profitability. As a matter of fact, a 1% increase in current asset profitability has the power to affect the general model by approximately 43%. The models established for capital structure also differed by country. On the general model, only the cash rate and the inflation rate are meaningful. The variable with the greatest influence is economic profitability. The 1% change model that will emerge in economic profitability has an impact power of approximately nine times.