Bank Loan Network in Turkey

Ayca Topaloglu Bozkurt and Suheyla Ozyildirim

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: In this study we document the topology of banks’ commercial loan network in Turkey using more than 44 million loan observations between 2007 and 2016 on a quarterly basis. To our knowledge, we study the largest financial network which includes all bank-firm loan transactions, i.e., population data that has not been studied up to now. First, we construct a network among banks resulting from their common borrowing firms. Second, we develop a novel weighted degree measure based on the share within the total banking sector of the loan volumes that banks lend to the same firms. Third, we empirically investigate the relationship between the credit riskiness of banks and their weighted degree centrality. Our empirical findings suggest that the credit riskiness of banks decreases with the weighted degree centrality of the banks emerging from lending to common borrowing firms. The impact remains significant after controlling for bank loan size, liquidity and even controlling for multiple lending. Finally, analysis based on micro-level stratifications where the loan size, collateral, multiple borrowings of firms and banks size are taken into account also supports our findings that there is a negative association between loan network centrality and credit risk.

Keywords: Bank-loan network; Bipartite network; Projected network; Weighted degree centrality; Multiple lending; Credit riskiness (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ara, nep-ban, nep-fdg and nep-net
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:2133

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