Market structure, efficiency and performance relationship in Turkish banking industry

This study analyses the effects of the competitive structure of Turkish banking sector and individual bank efficiencies on the performance of deposit banks operating during the years between 2002-2017. In the study as a first stage, the technical efficiency and scale efficiency scores of the banks are calculated with Data Envelopment Analysis utilizing a panel data set for 23 Commercial Deposit Banks. In the second stage, the effects of the bank efficiency scores and the market structure on banking performance, which are defined as return on assets and net interest margin, are analyzed. According to the results obtained from the analyses, the relationship between the market structure and bank's efficiency with the bank performance support neither the Efficient Structure Hypothesis nor the Structure-Conduct-Performance Hypothesis for the period of 2002-2017. However, it is indicated that there are some findings supporting the Relative Market Power Hypothesis due to the positive relationship between the market share of banks and net interest margin. In addition, the study reaches some findings that market concentration may have a negative impact on banking efficiency which is in line with the Quiet Life Hypothesis.