Evolution of banking efficiency within an unstable macroeconomic environment: the case of Turkish commercial banks

This paper analyses the efficiency performance of the Turkish banking sector between 1988 and 1999, a period characterized by increasing macroeconomic instability. The technical and scale efficiencies of Turkish commercial banks are measured with the use of nonparametric Data Envelopment Analysis. The empirical results suggest that over the sample period both pure technical and scale efficiency measures show a great variation and the sector did not achieve sustained efficiency gains. It is also reported that the sector suffers mainly from scale inefficiency and scale inefficiency, in turn, is due to decreasing returns to scale. There are also reported differences in the efficiency performance of commercial banks with different ownership status. In addition, the relationships between profitability, asset quality, size and the two definitions of efficiency are considered. Efficient banks are more profitable, and pure technical efficiency and scale inefficiency are positively related to size. The trend in the performance levels over the period suggests that macroeconomic conditions had a profound influence on the efficiency measures.     

Price Discovery in Real Estate Markets: A Dynamic Analysis

Although the correlation between the public and private market pricing of real estate has generated considerable research effort, the methods utilized in previous studies have failed to capture the dynamic nature of this correlation. This paper proposes a new statistical method to address this issue. This method, known as the dynamic conditional correlation GARCH model, enables us to study the dynamics of the correlation between the two markets over time and enrich our understanding of the public and private market pricing of real assets. We find that the correlation between NAV returns and REIT returns is dynamic for all REIT types and there is a strong degree of persistence in the series of correlation. Our Granger-causality tests show that price discovery generally takes place in the securitized public market. However, we also find significant variations across property types and individual firms within each type. Our results indicate that constructing an optimal portfolio requires firm level analysis of causality and correlation between REIT returns and NAV returns.     

The cost of operational risk loss insurance

Using the Algo FIRST operational risk database, this paper computes the cost of operational risk loss insurance for a sample of banks over a 1-year horizon. The estimated cost of 1-year operational risk loss insurance for an average bank is 1.24% as a percentage of firm value on December 31, 2006, while an average AA bank is 0.24%. These estimates far exceed the typical 1-year default insurance premiums as reflected in market CDS rates for similarly rated banks. These insurance premiums confirm the economic importance of operational risk in the management of financial institutions.     

Data Mining Approach for Direct Marketing of Banking Products with Profit/Cost Analysis

Nowadays, many businesses, such as banks, use direct marketing methods to reach customers to minimize the campaigning cost and maximize the return rate. To achieve this, huge customer data should be analyzed to determine the most appropriate product offer for each customer and the most effective channel to reach her/him. However, since only a very small amount of responses collected from the customers are positive to the offers, the dataset is very imbalanced. This decreases sensitivity ratio of prediction results and makes it difficult to make a successful product and channel selection for the offer. In this paper, we propose a hybrid system, which first classifies the customers to decide if s/he is interested in the offered product, and then clusters them for product and channel suggestions. Experiments with real life banking data show very promising accuracy results for predicting the proper product and channel for the customers. Moreover, cost-profit analysis is also added to this problem. Our experiment results show that the proposed method decreases a fraction of the total profit, but since the decrease in the total cost is very large, there is a huge increase in the overall profit/cost ratio.     

Social Transfers and Labor Force Participation Relation in Turkey: A Bivariate Probit Analysis

This study explores the association of labor force and social assistance program participation decisions in Turkey by employing the 2011 household budget survey (HBS) data. The issue is investigated in a bivariate probit framework, where the two incidences are jointly modeled. The differences in rural and urban behavior are also explored. Empirical results indicate that the more one works, the less one participates in social transfer program, and vice versa. Additionally, age, gender, household type and composition impact decision-making process of individuals both in urban and rural areas. The negative association between labor force participation and social transfer program participation is more pronounced in urban areas compared with the rural areas.     

MANAGING SWITCHING COSTS IN MULTIPERIOD PROCUREMENTS WITH STRATEGIC BUYERS*

This article examines the use of switching costs by long‐lived strategic buyers to manage dynamic competition between rival suppliers. The analysis reveals how buyers may employ switching costs to their advantage. We show that when switching costs are high, a buyer may induce suppliers to price more competitively by credibly threatening to replace the incumbent supplier with his rivals. The implications of this finding for adoption of technology and firm organization are explored in settings in which the buyer is integrated with the suppliers and where the buyer is an outsourcer.     

What future for Middle Eastern studies?

Middle Eastern Studies (MES) has increasingly come under attack in recent years. The critics have included the more politically oriented (as with Martin Kramer who reproached Middle Eastern scholars for failing to serve US interests) as well as generalists in various social science disciplines (who have criticised MES for having produced ‘theory-free’ work thereby failing to serve the cause of building cumulative social scientific knowledge). Middle Eastern scholars have responded to such criticism by seeking to point to various contributions MES has made over the years. These debates between Middle Eastern scholars and their critics have revealed three alternative future courses for MES: (1) going back to its roots in ‘Oriental Studies’ (as called for by Martin Kramer in Ivory Towers on Sand); (2) establishing itself firmly in the discipline-oriented social sciences (as called for by the avatars of methodology in the Social Sciences); (3) building upon the pioneering works of those Middle Eastern scholars who have sought to theorise from Middle Eastern experiences thereby contributing both to MES and the disciplines. Pointing to how the sides to these debates differ radically in terms of their understanding of ‘theory’, the article will suggest that the future of MES would be shaped depending upon which understanding of ‘theory’ comes to prevail.     

Tax perceptions and the demand for public expenditure: evidence from UK micro-data

Using responses from the 1995 British Social Attitudes Survey (BSAS), this paper assesses if there is evidence of voter misperception of tax costs. We find convincing evidence of income tax (IT) and value added tax (VAT) misperceptions, with a systematic bias towards overestimation of tax burdens for VAT, contrary to predictions of the fiscal illusion literature. We then integrate tax misperceptions into a model of demand for public expenditure. Voters' spending preferences are strongly related to their incomes, actual tax costs, and other fiscal-related household characteristics. A tendency to overestimate tax burdens appears to have only a modest influence on demands for public spending.