The persistence of profits in the Turkish banking system

Abstract

Most of the studies on persistency of profits investigate profit persistency in non-financial sectors. This study uses the panel data method to test for unit roots of profitability data and their persistency in the banking sector of an emerging country. Unit root hypothesis of data is rejected and concluded that in the long run persistency of profits does not exist.

Notes

¹ Berger et al . (2000) find that, in addition to market power in input markets, regional macroeconomic shocks are also important for banks profit persistency in the USA.

² This normalization process is becoming more important for countries like Turkey, where the economy is highly unstable due to political instabilities, balance of payment, budget deficit and inflation.

³ For the US BHCs Roland (1997) find that, there are more BHCs persistently generating negative abnormal profits than BHCs generating positive abnormal profits

⁴ Okumus's (2002), profitability study also supports the present findings.