Determination of Factors Affecting Financial Fragility in Banks Using Panel Data Analysis

Abstract

In the study, it is aimed to determine the micro factors that affect the financial fragility of the commercial banks which are continuously operating in the Turkish banking sector during 2002-2015 period. Financial fragility is represented by the non performing loan ratio and capital adequacy ratio while the micro factors are represented by return on assets, return on equity, liquid ratio, bank size, financial leverage and net interest margin. Two different models were composed to determine the factors affecting financial fragility. These models were analyzed by panel data method. At the end of the analysis, In model 1, A statistically significant and negative relationship was observed between bank size and non performing loan ratio while a statistically significant and positive relationship was observed between liquid ratio and non performing loan ratio. In model 2, A statistically significant and positive relationship was observed between capital adequacy ratio and net interest margin and return on assets while a statistically significant and negative relationship was observed between capital adequacy ratio and financial leverage and return on equity.