An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector
This study aims to identify the factors determining the use of derivatives in the banking sector. The study sample consists of 23 deposit banks operating continuously in the Turkish banking sector between 2009 and 2022. Derivative products classified as forward foreign exchange transactions, swap cu...
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| Format: | Article |
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Mehmet Akif Ersoy University
2024-12-01
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| Series: | Mehmet Akif Ersoy Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi |
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| Online Access: | https://dergipark.org.tr/en/download/article-file/3994171 |
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| author | Ali Hepşen Yusuf Pala |
| author_facet | Ali Hepşen Yusuf Pala |
| author_sort | Ali Hepşen |
| collection | DOAJ |
| description | This study aims to identify the factors determining the use of derivatives in the banking sector. The study sample consists of 23 deposit banks operating continuously in the Turkish banking sector between 2009 and 2022. Derivative products classified as forward foreign exchange transactions, swap currency transactions, swap interest rate transactions, futures transactions, and option transactions are analyzed in terms of selected financial indicators of banks, their characteristics, and their relationship with macroeconomic variables such as inflation. In the study, the random effect panel Tobit regression model is used as a method. The study's findings demonstrate that banks' derivative activities are significantly influenced by their on-balance sheet FX position. Size, capital, credit risk pressure, inflation, and foreign ownership strongly influence banks' use of derivatives. According to the study's findings, banks primarily use derivatives for hedging in over-the-counter market transactions and for speculation in organized market transactions. However, it has been observed that the drive for speculative trading is dominant in large banks. To counteract this trend, regulators could impose limits on how much banks can use derivative products, with the limits varying based on the bank's size, thereby reducing the incentives for large banks to engage in such practices. |
| format | Article |
| id | doaj-art-24ad843986b84138b0b316138badcf24 |
| institution | Kabale University |
| issn | 2149-1658 |
| language | English |
| publishDate | 2024-12-01 |
| publisher | Mehmet Akif Ersoy University |
| record_format | Article |
| series | Mehmet Akif Ersoy Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi |
| spelling | doaj-art-24ad843986b84138b0b316138badcf242025-01-27T12:39:37ZengMehmet Akif Ersoy UniversityMehmet Akif Ersoy Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi2149-16582024-12-011141518154110.30798/makuiibf.1498572273An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking SectorAli Hepşen0https://orcid.org/0000-0002-3379-7090Yusuf Pala1https://orcid.org/0000-0002-8835-0157ISTANBUL UNIVERSITYAMASYA ÜNİVERSİTESİ, GÜMÜŞHACIKÖY HASAN DUMAN MESLEK YÜKSEKOKULUThis study aims to identify the factors determining the use of derivatives in the banking sector. The study sample consists of 23 deposit banks operating continuously in the Turkish banking sector between 2009 and 2022. Derivative products classified as forward foreign exchange transactions, swap currency transactions, swap interest rate transactions, futures transactions, and option transactions are analyzed in terms of selected financial indicators of banks, their characteristics, and their relationship with macroeconomic variables such as inflation. In the study, the random effect panel Tobit regression model is used as a method. The study's findings demonstrate that banks' derivative activities are significantly influenced by their on-balance sheet FX position. Size, capital, credit risk pressure, inflation, and foreign ownership strongly influence banks' use of derivatives. According to the study's findings, banks primarily use derivatives for hedging in over-the-counter market transactions and for speculation in organized market transactions. However, it has been observed that the drive for speculative trading is dominant in large banks. To counteract this trend, regulators could impose limits on how much banks can use derivative products, with the limits varying based on the bank's size, thereby reducing the incentives for large banks to engage in such practices.https://dergipark.org.tr/en/download/article-file/3994171turkish banking sectordeposit banksderivativeshedgingspeculationturkish banking sectordeposit banksderivativeshedgingspeculation |
| spellingShingle | Ali Hepşen Yusuf Pala An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector Mehmet Akif Ersoy Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi turkish banking sector deposit banks derivatives hedging speculation turkish banking sector deposit banks derivatives hedging speculation |
| title | An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector |
| title_full | An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector |
| title_fullStr | An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector |
| title_full_unstemmed | An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector |
| title_short | An Investigation of the Relationship Between Banks' Use of Derivative Products and Sectoral and Macroeconomic Factors: An Application on the Turkish Banking Sector |
| title_sort | investigation of the relationship between banks use of derivative products and sectoral and macroeconomic factors an application on the turkish banking sector |
| topic | turkish banking sector deposit banks derivatives hedging speculation turkish banking sector deposit banks derivatives hedging speculation |
| url | https://dergipark.org.tr/en/download/article-file/3994171 |
| work_keys_str_mv | AT alihepsen aninvestigationoftherelationshipbetweenbanksuseofderivativeproductsandsectoralandmacroeconomicfactorsanapplicationontheturkishbankingsector AT yusufpala aninvestigationoftherelationshipbetweenbanksuseofderivativeproductsandsectoralandmacroeconomicfactorsanapplicationontheturkishbankingsector AT alihepsen investigationoftherelationshipbetweenbanksuseofderivativeproductsandsectoralandmacroeconomicfactorsanapplicationontheturkishbankingsector AT yusufpala investigationoftherelationshipbetweenbanksuseofderivativeproductsandsectoralandmacroeconomicfactorsanapplicationontheturkishbankingsector |