Performance Analysis of Turkish Banking Sector in the Context of The Problem of Asymmetric Information

Ferhat PEHLİVANOĞLU, Figen BÜYÜKAKIN

Özet


Financial system in a given country brings lenders and borrowers together in one place. If the system is functioning under conditions of perfect competition, allocation of credits to the most productive ventures will be streamlined as the nature of the market necessitates perfect information. However, financial system in the real world is complex and its operation deviates from conditions that the perfect competition purports. In other words, participators in real financial markets have asymmetric information as opposed to perfect information advocated in perfect competitive market. As a result of this, as lending and borrowing decisions are not “riskless” i.e. risk is unavailable in the presence of perfect information, it may comprise moral hazard problems viz. “excessive risk taking”. These cause national income to decrease, real economic activities to decline and in a worst case scenario a financial crisis to occur by hampering the functioning of financial system efficiently. More precisely, the presence of asymmetric information in financial market reduces level of market efficiency, it again causes reduction in economic efficiency as a result of wrong credit decisions in credit market and due to credit rationing, it prevents transfer of credits to investments in the economy and implementation of productive projects, thus bringing adverse effects on economic development.  For this reason, especially in countries like Turkey in order to attain basic macroeconomic objectives, adverse selection and moral hazard that are caused by asymmetric information have to be lowered to the minimum. From this point forward, this study first provides conceptual explanations and literature review and then proceeds to the analysis of Turkish banking sector’s efficiency under the context of asymmetric information before and after the crisis. Data Envelopment Analysis will be used in analyzing efficiency. Furthermore, different policy recommendations aimed at solving problems and limitations will be discussed.


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