Liberalization, Ownership and Productivity in Turkish Banking

This paper examines productivity developments in public, private and foreign banks operating in Turkey over the initial post-liberalization period. With the help of a DEA-type Malmquist index approach, it also tries to explore the contributions of technological change, efficiency change and scale change to productivity growth. The results indicate that all forms of banks benefited from the liberal environment and the performance gap between public and private banks got narrowed. The major source of productivity gains is scale changes for domestic banks and technical progress for foreign banks. Moreover, the pace of productivity growth became stronger as the reforms accelerated and competition reined in the market. In terms of productivity growth, foreign banks strongly dominate domestic banks and there are no observed advantages accruing to larger banks.