Analysis of determinants of profitability in banking sector: An econometric application on Turkish banking sector

As with all for-profit businesses, banks are profit-seeking organizations. While banks continue their operations profitably, they also need to secure themselves. In order for banks to continue their activities without interruption and to reach their growth targets in the long term, they need to generate sufficient profits. This paper aims to find out the determine the bank specific factors of affecting the financial performance of banks in Turkish banking industry between the years 2003 and 2020. Panel data analysis was used as a method in the study and performance factor adopted is return on equity. We made use of econometric techniques such as second-generation panel unit root under the cross-sectional dependence were used in econometric analyses. The study is designed to consist of four parts. In the first part, the focus is on issues such as the problem, subject, purpose, importance and limitations of the research. In the second part, the financial system and the financial structure in Turkey are explained. In the third chapter, the historical development of banking in the world and in Turkey is emphasized. In the fourth chapter, bank-specific factors on the profitability of commercial banks operating in the banking sector in Turkey were tried to be determined within the scope of the established model. Empirical findings indicate that capital adequacy ratio, net balance sheet position, TL liabilities ratio, deposit ratio, loan size, loan deposit ratio and non-interest income have a statistically significant and affect return on equity positively. On the other hand, YP Assets / YP Liabilities ratio, credit risk variables no statistically significant relationships could be found between return on equity