Strategies for the Robust Banking System and the Determinants of the Commercial and Participation Banks Performance in Turkey Evidence from a Panel Data Analysis

The primary purpose of this study is to investigate the internal determinants of commercial and participation banks operated profitability in Turkey over the time from 2010Q1 to 2018Q4 and recommend strategies for the robust banking system regarding The Turkish bank system. Within this context, quarterly data of 20 commercial and three participation banks were analyzed by using the fixed panel regression model. The bank performance is measured by using return on asset (ROA) and return on equity (ROE). As a result, it was found that size has a negative and significant impact on participation banks ROE and commercial banks both ROE and ROA. It was also concluded that credit risk (CR) has an adverse and significant effect on participation banks. However, non-interest income to the total asset (OFFBS) has a positive and significant impact on all bank profitability. The results also showed that the coefficient of capital adequacy for participation bank ROA is positive and significant. At the same time, its effect is negative and significant for commercial bank ROE and participation bank ROE. Finally, liquidity management is positively related to participation bank ROE. Concerning the results of the model, the commercial and participation bank profitability are associated with the bank-specific determinants. Because of this situation, bank managements and policymakers should initially focus on improving bank management, the lending policy and banking activities so the bank performance will continue in a crisis period.