Bank competition and outreach: evidence from Turkey

In light of the importance of banking sector outreach and given concerns that competition may adversely affect it, this study explores the empirical linkage between banking structure and outreach in Turkey for the period 1988-2010. Bank-, province-, and bank-province-level estimation results indicate that competition is in general conducive to the outreach of banks. We do not find evidence for collusive behavior among banks when they have multimarket contact. At the province level, the presence of foreign-owned banks is associated with higher outreach, while at the bank-province level, we observe that outreach of domestic banks exceeds that of foreign banks. Together, these results suggest that there are procompetitive spillover effects from foreign banks to their domestic counterparts

Culture, Income, and CO2 Emission

Given the devastating effects of global warming, the problem of human-induced climate change, and in particular carbon dioxide emissions, has been high on the global policy agenda. In this study, we examine the relationship between national culture, carbon dioxide emissions, and economic growth in the framework of the Environmental Kuznets Curve (EKC). Applying system GMM panel estimator across 69 developed and developing countries, we confirm the existence of EKC and show that culture significantly affects the income-emission relationship. Moreover, the effects of the six cultural dimensions on EKC can be collapsed into two: (i) masculinity, power distance and indulgence move the EKC upward and shift the income turning point to the left; and (ii) individualism, uncertainty, and long-term orientation move the EKC downward while shifting the income turning point to the right. The impact of culture on EKC remains also robust for alternative specifications. Future policy and global initiatives in sustainable development should incorporate the multidimensional impact of culture on national behavior towards environment and economic growth, a relationship that has been largely ignored in economic decision-making models

Financial crisis, macroprudential policies, and depositor discipline

This paper examines to what extent macroprudential policies in the Turkish banking sector affected the functioning of depositor discipline. Our results suggest that depositors’ responses for poor bank performance get stronger after the 2008 crisis, when various macroprudential measures were implemented to preserve financial stability. In the aftermath of the crisis, bank behavior toward depositors also alters. Ahead of the crisis, banks did not significantly respond to the discipline exerted by depositors, however, banks begin offering higher rates to curb deposit withdrawals afterwards. Our findings suggest that the implementation of macroprudential tools seem to have a positive impact on financial stability, since, in the post-2008 period, regulatory supervision have been more firmly assisted by the market

Favoring the small and the plenty: Islamic banking for MSMEs

While MSMEs form the backbone of many countries, most of them suffer from limited access to finance. We extend the literature by examining whether Islamic banks, compared to their conventional peers, favor more the MSMEs credit market segment in Turkey. We do this by considering various aspects of the lending behavior towards MSMEs (total lending, foreign currency lending, loan commitments, loan quality, and revenues) across different MSMEs size categories (micro, small and medium-sized firms). Our results show that once we control for bank-specific characteristics, we find that Islamic banks are more engaged with MSME financing and generate more revenues from servicing MSMEs. Concerning the quality of the MSME lending portfolio, no distinguishable patterns were observed between Islamic and conventional banks

Islamic banks, deposit insurance reform, and market discipline: evidence from a natural framework

Although it has been intensively claimed that Islamic banks are more subject to market discipline, the empirical literature is surprisingly mute on this topic. To fill this gap and to verify the conjecture that Islamic bank depositors are indeed able to monitor and discipline their banks, we use Turkey as a test setting. The theory of market discipline predicts that when excessive risk taking occurs, depositors will ask higher returns on their deposits or withdraw their funds. We look at the effect of the deposit insurance reform in which the dual deposit insurance was revised and all banks were put under the same deposit insurance company in December 2005. This gives us a natural experiment in which the effect of the reform can be compared for the treatment group (i.e., Islamic banks) and control group (i.e., conventional banks). We find that the deposit insurance reform has increased market discipline in the Turkish Islamic banking sector. This reform may have upset the sensitivities of the religiously inspired depositors, and perhaps more importantly it might have terminated the existing mutual supervision and support among Islamic banks

Religiosity versus rationality: depositor behavior in Islamic and conventional banks

This study investigates the behavioral aspects of Islamic bank depositors in a dual banking system. By categorizing depositors into groups based on the amount of their deposited funds, we estimate the responses of these groups to interest rate changes. We take the findings of conventional banks as a comparative baseline and investigate the extent to which the changes in different Islamic depositor groups differ from conventional depositor groups. The findings show that depositors in both Islamic and conventional banks respond to interest rate changes. The analysis indicates that Islamic bank depositors are more responsive when their deposit sizes are larger. When Islamic bank depositors' opportunity costs rise due to a rise in the interest rate, they do not hesitate to withdraw deposits. The relation between interest rate changes and deposits is more robust in Islamic banks than in conventional banks

Foreign Trade, Education And Innovative Performance: A Multilevel Analysis

This research analyses the innovative performance of 5273 companies across 64 different economic sectors and 32 different regions in Colombia. We assess the different effects on the innovative performance of firms by analyzing firm, sector, and regional level determinants. The study involves the multilevel approach of the innovation process considering the structure and behavior of innovation systems in developing countries. We furthermore focus on technology transfer from foreign trade and the role of education in the process of innovation. We find that education and open economy variables have a significant relationship with innovation performance at the firm and regional levels