The Effects of 2008 Financial Crisis on Turkish Banking Sector Performance and Profitability : Financial Ratios and Accounting Based Approach

There is an inter-relationship between financial crisis and banking performance as prior research and literature suggests. The business world today is more global than ever and financial crisis affect national economies just like dominos. More importantly, financial crisis have several negative impacts such as unemployment, high inflation, decreased investments, low levels of privatization, mergers and acquisitions. Likewise, the role of banking sector in modern economies can never be neglected. This is because banks are the locomotives of markets and they serve significant functions such as enabling investments, lending funds, supporting entrepreneurship and providing liqudity. Thus, revealing the double-sided link between financial crisis and performance of banking sector presents numerous advantages and helps to take corrective measures for the future. However, the tie between financial crisis and banking sector is still not crystal clear and debate continues on this issue without satisfactory explanations. Moreover, research focusing on the emerging markets arena which investigates the correlation between financial crisis and banking sector performance is even more limited. This study concentrates on 2008 financial crisis effects on banking sector performance and profitability of Turkey, that is an emerging economy. For this purpose, the financial period of 2002-2015 is included to the analysis to test both the prior and post crisis effects. Financial ratios as variables and indicators of banking sector performance are utilized as the methodology of study to bring an accounting approach to the research. Furthermore, both state and private banks are integrated to the study to avoid bias and subjectivety as well as ensuring independence