Use of derivatives, financial stability and performance in Turkish banking sector

Dilvin Taşkın; Görkem Sarıyer; Dilvin Taşkın; Görkem Sarıyer

doi:10.3934/QFE.2020012

Quantitative Finance and Economics

2020, Volume 4, Issue 2: 252-273. doi: 10.3934/QFE.2020012

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Research article

Use of derivatives, financial stability and performance in Turkish banking sector

Dilvin Taşkın ^,,
Görkem Sarıyer

Faculty of Business, Selcuk Yasar Campus, Yasar University, Universite Caddesi, Agacliyol, Izmir, Turkey

Received: 03 March 2020 Accepted: 03 April 2020 Published: 13 April 2020
JEL Codes: G30, G32, M41

Recent financial turmoil raised suspicions about the impact of derivatives usage on banking stability. Considering the period between 2007 and 2017, this paper analyzes the impact of derivatives on the financial stability and performance of the Turkish banking system. The stability of the banking is measured by considering the Z-index, which shows the probability of and calculated for each bank. The second aim of this paper is to determine the impact of bank specific characteristics on the derivatives usage of banks. Panel regression models and factorial ANOVA analysis is adopted to perform the analysis. The results show that derivatives usage of banks decrease the profitability of banking system and increase the bank risk. The determinants of derivative usage also suggest that banks do not use derivatives to hedge their risks.
- bank risk,
- Z-index,
- derivative usage,
- bank profitability,
- Turkish banking sector
Citation: Dilvin Taşkın, Görkem Sarıyer. Use of derivatives, financial stability and performance in Turkish banking sector[J]. Quantitative Finance and Economics, 2020, 4(2): 252-273. doi: 10.3934/QFE.2020012

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Abstract

Recent financial turmoil raised suspicions about the impact of derivatives usage on banking stability. Considering the period between 2007 and 2017, this paper analyzes the impact of derivatives on the financial stability and performance of the Turkish banking system. The stability of the banking is measured by considering the Z-index, which shows the probability of and calculated for each bank. The second aim of this paper is to determine the impact of bank specific characteristics on the derivatives usage of banks. Panel regression models and factorial ANOVA analysis is adopted to perform the analysis. The results show that derivatives usage of banks decrease the profitability of banking system and increase the bank risk. The determinants of derivative usage also suggest that banks do not use derivatives to hedge their risks.

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