The Relationship of Banks’ Profitability and Financial Soundness Indicators: Granger Causality Analysis in Turkey

Sabrı Burak Arzova and Bertaç Şakir Şahin
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Sabrı Burak Arzova: Marmara University
Bertaç Şakir Şahin: Yıldız Technical University

Journal of Finance Letters (Maliye ve Finans Yazıları), 2023, vol. 38, issue 119, 61-76

Abstract: This study investigates the effect of financial soundness variables on bank performance in turkey. In the study, banking data and inflation at the macroeconomic level for the period 2000-2019 are used in two models. in the research model, return on assets and return on equity are included in the research model as variables representing bank performance. Capital adequacy ratio and non-performing loans are the financial soundness variables in the model. According to Granger causality analysis, there is a bidirectional causality relationship between return on assets and capital adequacy ratio. Similar relationship exists between inflation and non performing loans

Keywords: Financial Soundness; Bank Profit; Turkey (search for similar items in EconPapers)
JEL-codes: E44 G00 G15 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:acc:malfin:v:38:y:2023:i:119:p:61-76

DOI: 10.33203/mfy.1192630

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