Research of Financial Efficiency of Banks Operating in Bist Bank Index Between 2016-2023

Abstract

Purpose – The aim of the study is to determine the efficiency of banks in the BIST Bank Index in Turkey based on their financial performance between 2016 and 2023 and to make recommendations for ineffective banks. Design/methodology/approach – In the study, financial performance ratios obtained from selected ratios published by the Turkish Banking Association were analyzed with Data Envelopment Analysis (DEA) using the Input-Oriented BCC Method. The research scrutinizes input variables such as the capital adequacy ratio, the ratio of total loans and receivables to total assets, and the proportions of fixed and liquid assets to total assets, along with output variables including average asset and equity profitability. Findings – The findings indicate significant fluctuations in the banks' performance over the analyzed period. According to efficiency scores, while some banks consistently exhibited high performance, others experienced decreases in efficiency in certain years. Inputs and outputs for improvement for inefficient banks have been identified. Discussion – The study distinctly clarifies the meaning and importance of the variables used in the performance analysis, providing strategic insights to bank managements regarding operational efficiency and financial robustness. The recommended strategies involve strengthening internal audit mechanisms, developing training programs, and enhancing performance management processes to increase banks' efficiency, minimize risks, and promote sustainable success in the sector. It is possible for banks that show lack of efficiency to reach full efficiency by increasing their efficiency levels. This will play a critical role in shaping the financial decisions of bank stakeholders.