Do financial reforms always improve banks efficiency and competition? A long-term analysis of Turkey’s experience

Nuri Altintas, Alessandra Ferrari () and Claudia Girardone
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Nuri Altintas: University of Reading
Alessandra Ferrari: University of Loughborough

Journal of Banking Regulation, 2022, vol. 23, issue 4, No 7, 458-469

Abstract: Abstract Financial policy changes are aimed at improving banks efficiency and competition; however, their effectiveness in the context of emerging economies is far from obvious. Using Turkey as a case study, we create a unique data set and analyse the impact of almost 30 years of financial policy changes on the cost efficiency and competitiveness of its banks. We estimate a stochastic cost frontier with inefficiency determinants and then rely on two complementary approaches for the measurement of competition: a novel implementation of the Boone model, and the Persistency of Profit (POP) model. We find that deregulation does not bring the expected benefits, and performance starts improving only after the introduction of prudential re-regulation policies. The entry of foreign banks helps technological progress, competition and efficiency improvements, and all banks eventually reach similar efficiency levels.

Keywords: Financial regulation; Financial policies; Stochastic frontiers; Banks efficiency; Banks competition (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41261-021-00182-0

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