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This paper examines persistence of profit in Turkish banking system for the period 1998:1–2009:4 by focusing both net income after tax to total assets (ROA) and net income after tax to total equity (ROE) as profit measures by utilizing panel LM unit root test. We found that competition among surviving banks is high in the Turkish Banking System for the period 1998:1–2009:4. In addition, when we compare the ROA and ROE results in terms of persistence, competition is higher in Turkish banking system for ROE than ROA.
... They use unit root tests and find that in the short-run persistence of profits is moderate whereas abnormal profits disappear in the long-run. In a recent paper, Iskenderoglu et al. (2011), investigate the POP hypothesis within the Turkish banking system using quarterly data over the period 1998-2009. They utilize panel unit root tests for eight banks and find no evidence of profit persistence. ...
... There is an extending empirical literature on the persistence of profits in banking sectors (Berger et al., 2000;Gaddard et al., 2004aGaddard et al., , 2004bAgostino et al., 2005;Bektas, 2007;Kaplan and Celik, 2008;Aslan et al., 2011, Goddard et al., 2011Iskenderoglu et al. 2011;Dietrich and Wanzenried, 2012;Kanas et al., 2012;Turgutlu, 2014;Chronopoulos et al., 2015). Among these papers, Bektas (2007), Kaplan and Celik (2008), Aslan et al. (2011), Iskenderoglu et al. (2011), and Turgutlu (2014 investigate the persistence of profitability in the Turkish banking sector. ...
This paper investigates whether there is a convergence of profit rates in the Turkish
banking sector for the period 2003:Q4-2014:Q3 and provides empirical evidence from the
largest ten banks in the sector by employing the approach of Nahar and Inder (2002). The
empirical evidence reveals that only two banks’ profits converge to the average. Therefore, the
paper concludes that there is not an intense competition that can bring excess profits to
competitive levels in the Turkish banking sector.
Tourism is a sector where price competition is said to be intense and profit margins are low. In the sectors where competition is intense, it is anticipated that the profits above and below the average will disappear. According to this, competition equalize profits at a competitive profit rate, and in the sectors where competition is intense, it is not expected that the profit will be persistent. This situation, called the competitive environmental hypothesis, has been discussed for many sectors in the current literature. Knowing whether the persistence of profitability in the tourism sector will inform about the competition. In this context, it is aimed to determine whether the profits are persistent or not in the publicliy traded lodging companies. Net profit margins, return on equity and return on assets were tested by using panel data unit root analysis of quarterly data for 2008-2017 period of 7 lodging companies traded in Borsa Istanbul. It has been determined that profits in terms of return on equity are not persistence and competitive environment hypothesis is valid for return on equity. According to this result it can be said theoretically that the companies in the sample will have positive developments in equity profitability over time. The results obtained in terms of net profit margin and return on asset show that the competitive environment hypotesis is invalid and the profitability is persistent.
PURPOSE Due to the nature of the assets in Iran, markets such as stock markets are options facing investors as asset portfolio, with different returns. Usually, investors are looking for higher returns. By accumulation of investors on markets with higher returns, it is expected that the long-run returns of such markets be decreased, which leads to the induction of difference between these markets’ returns with other markets. This can be named as returns convergence of different asset markets. METHODOLOGYThis study aims to also examine the returns convergence of stock markets in Iran over the period 2009:05- 2016:02, using Nahar and Inder method. This method examines the returns convergence of each of these markets to the average returns of them.MAIN FINDINGSBased on the results, the returns of banks and credit institutions, industrial companies, mining of metal ores, chemical products, refined petroleum and nuclear fuel, cement are converged to the average returns. All coefficients are statistically significant at a confidence level of ten percent. But basic metals, telecommunications, multidisciplinary, automobile and parts, engineering services, materials and Manufacture of coke, lime and plaster, materials and pharmaceutical products, transport, storage and communications, computer and related activities, mass product, real estate and food products and Beverage except sugar`s returns has not converged to the average returns.IMPLICATIONS This study can be called as the convergence of diverse market. Namely, returns of different investment markets will be converged on each other in the long term.NOVELTY/ ORIGINALITY The present study, when focusing on the examination the returns convergence of stock markets in Iran, differs from the previous researches.
The paper tests which variables have contributed to the profitability of Serbian commercial banks in the last decade by employing multiple linear regressions. The study focuses on a bank-specific determinant and explores statistical importance of various financial ratios for reported return of average assets (ROAA), as well as return on average equity (ROAE). The variable that proved able to explain most of variability in reported profitability is loan loss provisions to net interest income. Slightly less informative is cost to income ratio. Other tested variables: equity to total assets, bank size proxy, net interest margin, liquid to total asset as well as ownership dummy, appear to have modest effect on chosen bank profitability indicators.
In recent years, the investigation of persistency of profit for insurance sector has become a significant subject of research with its increasing importance in economy. With this respect, by using the data of return on assets (ROA) and return on equity (ROE) of 7 insurance companies quoted in BIST (Stock Market of Istanbul) in the period from March 2005 till September 2013, the profit of these companies was investigated whether persistent or not via IPS (2003) without break and Panel LM (2005) with structural break unit root tests. As a result of study, by eliminating the findings via panel LM test that profit was observed persistent from model without break, profit was determined non-persistent in situation taken into account structural breaks. The reason of this situation can be competitive economic structure and effects of 2008 global financial crisis in the scope of being developing country of Turkey. Furthermore, these findings are supported by accomplished previous literature for Turkey.
We investigate how banking market competition, informational opacity, and sensitivity to shocks have changed over the last three decades by examining the persistence of firm-level rents. We develop propagation mechanisms with testable implications to isolate the sources of persistence. Our analysis suggests that different processes underlie persistence at the high and low ends of the performance distribution. Our tests suggest that impediments to competition and informational opacity continue to be strong determinants of persistence; that the reduction in geographic regulatory restrictions had little effect on competitiveness; and that persistence remains sensitive to regional/macroeconomic shocks. The findings also suggest reasons for the recent record profitability of the industry.
Industrial economics research has devoted little attention to long-run considerations of market structure and performance relationships. This paper provides several insights into the dynamics of corporate performance. A dynamic duopoly model is provided in which new firm entry causes a convergence of profits toward a new equilibrium. This process has been examined empirically, and both the speed of profit adjustment and the level to which this process converged in the long run has been studied. For Germany, it has been found that entry and mobility of firms led to a relatively quick profit convergence, which is an indicator for the functioning of competition. However, the convergence process was not complete since it did not result in an equalization of profit rates across firms.
This paper reports on time-series analyses of the persistence of profitability of firms in emerging markets. Its central result is that there is less persistence in developing than in advanced economies. The implications for the intensity of competition in emerging markets are examined.
The theme of unit roots in macroeconomic time series have received a great amount of attention in terms of theoretical and applied research over the last three decades. Since the seminal work by Nelson and Plosser (1982), testing for the presence of a unit root in the time series data has become a topic of great concern. This issue gained further momentum with Perron's 1989 paper which emphasized the importance of structural breaks when testing for unit root processes. This paper reviews the available literature on unit root tests taking into account possible structural breaks. An important distinction between testing for breaks when the break date is known or exogenous and when the break date is endogenously determined is explained. We also describe tests for both single and multiple breaks. Additionally, the paper provides a survey of the empirical studies and an application in order for readers to be able to grasp the underlying problems that time series with structural breaks are currently facing.
The endogenous two-break unit root test of Lumsdaine and Papell is derived assuming no structural breaks under the null. Thus, rejection of the null does not necessarily imply rejection of a unit root per se, but may imply rejection of a unit root without break. Similarly, the alternative does not necessarily imply trend stationarity with breaks, but may indicate a unit root with breaks. In this paper, we propose an endogenous two-break Lagrange multiplier unit root test that allows for breaks under both the null and alternative hypotheses. As a result, rejection of the null unambiguously implies trend stationarity. Copyright (c) 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
We present a trend-based alternative to the standard first-order autoregression model in persistence of profits studies. This is motivated by reservations over the interpretation of the standard model, and rests on a different concept of dynamic competition. A nine-category taxonomy of long-run persistence stereotypes is developed. Structural time series estimates are presented for a sample of UK companies. We find the null of long run competitive equilibrium not rejected in nearly a third of cases, but non-eroding persistence to be present in around 60%.