Review article
OFF-BALANCE SHEET ACTIVITIES IMPACT ON COMMERCIAL BANKS PERFORMANCE: AN EMERGING MARKET PERSPECTIVE
Bora Aktan
Chan Sok Gee
Sasa Žiković
Pinar Evrim-Mandaci
Abstract
This paper examines the effect of off-balance sheet
(OBS) activities on performance of the banks listed on
Istanbul Stock Exchange (ISE). We use four measures
of performance including bank’s risk exposures,
profitability, leverage, and liquidity position. We find
that both bank-specific risk and foreign exchange rate
risk are positively related with OBS activities. This
indicates that OBS activities increase bank-specific
and foreign exchange risk exposures of the banks
in Turkey. The positive relationship might serve as
a warning to bank’s speculative action using OBS
transactions in the market. The results also indicate
that OBS activities, due to its hedging perception,
improve bank’s stock returns but have a negative
impact on return on equity. In addition, OBS activities
do not have a statistically significant impact on
leverage or liquidity.
Keywords
Banking; Off-balance sheet activities; Risk exposure; Istanbul Stock Exchange; Turkey
Hrčak ID:
109119
URI
Publication date:
1.10.2013.
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