Abstract:

An important result of the globalization process is the liberalization of foreign trade and international capital flow in many countries. Increased entrance of foreign banks is among remarkable outcomes of this course. Due to this fact, analysis of the impact of foreign bank entrances on the domestic banking systems, especially with respect to efficiency, has been subject to numerous studies. In this paper, efficiency of both foreign banks and domestic private and public banks in Turkey has been analyzed, where entrance of foreign banks has been experienced intensively. According to the results of the Malmquist Total Factor Productivity (TFP) Analysis, productivity increase in case of foreign banks is found to be higher compared to that of the domestic ones, and this finding is found to be rather related to technological infrastructure. When sub-components of the changes in the TFP level of the foreign banks were further analyzed, it is identified that changes in both pure technical efficiency and in efficiency of scale had limited impact and that technological change was the leading reason for both positive and negative changes.

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