Determinants of bank lending during crises: an empirical analysis of banking in Turkey

Official URL: http://risc01.sabanciuniv.edu/record=b1630625 (Table of Contents)

The Turkish economy experienced two financial crises during the past two decades; one in 1994 and the other in 2000-2001. Bank lending may change in crisis episodes depending on different bank characteristics. This paper analyzes how distinct bank qualities- i.e. ownership status, liquidity, asset quality, profitability, capitalization, and size- affect bank lending during crises. Using data on loans extended by the banking sector in Turkey over the period 1994-2015, we show that bank lending decreases in crisis episodes. We further show that foreign banks play a stabilizing role during crises in Turkey by lending more than domestic banks, whereas state banks cut back their lending more. Our findings also show that bigger banks reduce their lending more in crisis episodes.