Determinants of financial performance of foreign banks operating in Turkey: An econometric analysis

In this study; determinants of financial performance of foreign banks operating in Turkey is investigated by panel data analysis method using annual data of 14 banks for 2007-2017 period. In the study, stationarity of the series is examined by LLC and IPS panel unit root tests and it is seen that all series are I(1). Existence of cointegration relationship between the series is tested by Perron (2004) method and it is found that the series are cointegrated. The long and short term analyzes of the series are conducted by panel FMOLS method. Capital adequacy ratio, deposits, non-performing loans, liquidity and net interest incomes are the most important determinants of the financial performance of banks with foreign capital. Error correction mechanism of the models is operating. In Granger panel causality test; the factors affecting the asset profitability of banks are found to be capital adequacy ratio, liquidity ratio net interest income after specific provisions while factors affecting return on equity is capital adequacy ratio and liquidity ratio.