Abstract:

Participation banks operating in the Turkish banking system have not yet demonstrated sufficient progress even though it has raised its share in the banking sector over time. Increasing the efficiency of participation banks providing alternative investment and financing opportunities is crucial in terms of providing resources for the economy and development of the financial system. For this reason, the performances of the participation banks have been analyzed in a comparative way. In this study, the data has comprised financial ratios obtained from financial statement of participation banks in Turkey for the 2006-2014 periods. Independent samples t- test results revealed that the magnitude of liquid assets and total assets of deposit banks have been considerably higher than participation banks. Furthermore, in terms of capital adequacy, deposit banks have had a stronger structure than participation banks. In addition, the factors affecting the profitability of banks have been estimated by a two-stage generalized method of moments (GMM). The analysis has shown that bank profitability has a positive relationship with capital adequacy and operational efficiency whereas it has a negative relationship with the ratio of nonperforming loans to total loans as an indicator of credit quality

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