Determining the factors affecting financial performance in the participation and deposit banks, a study on Turkish banking sector

Nowadays, the banking sector is at the center of all financial systems in the world and has the most important role in these systems. Turkish banking sector has also made rapid progress in the direction of developments in the world and has become the locomotive of the financial system. Undoubtedly, the profitability of the banks that have such an important position in the financial system is very important not only for the banks but also for the sustainable development of the whole economy. The aim of this study is to investigate the factors affecting the financial performance of commercial (deposit) and participation banks operating in the Turkish banking sector. Within the scope of the study, firstly basic information about banking and bank types were transferred, then history of the banking sector in the world and Turkey and recent developments were discussed. The study also included a comprehensive literature review. In the last section, the factors affecting the financial performance of deposit and participation banks subject to the study were examined with balanced panel data analysis in six different models using the macroeconomic indicators, a sector-specific variable and bank-specific variables for the period of 2005-2017 and the results were evaluated. According to the results, the NPL ratio and the development level of the banking sector have a negative effect on the financial performance of deposit and participation banks. The effect of other independent variables on financial performance varies according to the type of bank analyzed and the dependent variable which is the performance measure. Keywords: Banking, Profitability, Financial Performance, Participation Bank, Deposit Bank, Panel Data Analysis