Bank mergers in Turkey and the impact of merger process on banks : An application

The purpose of this study is to analyze the merger trend which has been frequently encountered in Turkish banking sector and to measure the impact of mergers on the performance of merging banks. In conformity with this purpose, primarily the mergers in banking sector were examined in a theoretical framework and a literature review was made in respect of the merger trend. For guiding purposes, it was examined in the following chapter, on basis of the selected countries, what kind of a process the merger trend has come through. Mergers in Turkish banking sector were evaluated under the light of developments in Turkish banking system after 1980 for purpose of integrity.Within this scope, the impact of merging on performance of merging banks was examined in scope of a research carried out with regard to the impact of optional bank mergers on performance of merging banks, between years 2002-2007 in Turkey. In this study, the impact of mergers on performance of mergers on performance of banks was analyzed through a comparison between efficiency values estimated before and after merger. Changes in performance were measured by using the Data Envelopment Analysis method under the assumption of variable yield by scale during the study in which an input-oriented approach was adopted. In addition to that of merging banks, also the efficiency values of banks continuously performing activity between 2002-2008 were estimated in the study. Acting from the intermediation approach in the research model, capital, deposit, interest expenses and non-interest expenses were used as input; and credits, interest yields and non-interest yields were used as outputs.As a result of the analysis, an increase was observed in performances of merging banks. During the related period, 6 out of 12 merging banks were observed to have an increase in performance, while a decrease was observed in performance of 3 banks and no change was observed in performance of 3 banks. In addition, the average efficiency values of merging and non-merging banks in the analysis period was compared, in scope of which it was concluded that average efficiency values of merging banks were a little above the average efficiency values of other banks, though not quite sharp.Key words: Turkish Banking System, Growth, Bank Mergers, Efficiency, Data Envelopment Analysis