The Effect of Capital Competence on the Profitability of Development and Investment Banks in Turkey

Abstract

The study examines the influence of capital competence on the bank profitability of development and investment banks in Turkey. Turkish economy was basically an agricultural economy till it moved to the modern and commerce economy (Hasan et al., 2019). The study also sought to establish challenges that are being encountered in ensuring that banks have high-quality capital competence that promotes improvements in profitability. ARDL model was used to estimate a capital competence-profitability using annual time-series data from the period 1961 to 2016. The obtained results showed that there is a long-run counteraction between capital competence and bank profitability. The results also showed that long-run improvements in economic growth and banks’ asset quality will result in a significant fall in bank performance while increases in bank capital, bank liquidity, and inflation will result in a significant fall in bank profitability.
Keywords: Autoregressive distributed lag, asset quality, bank capital, bank liquidity, bank profitability, economic growth, inflation