Applying a two-stage TOPSIS approach and stepwise regression in evaluating bank performance: evidence from Turkish banks

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As a crucial component of the financial sector, banks play an intermediary role in creating and providing financial services to customers. Therefore, the evaluation of banking sector activity is important for stakeholders and managers. This paper investigates the key criteria in analyzing bank performance and efficiency and the relative performance of Turkish banks in terms of the pre-determined criteria during 2008–2018. This study aims to introduce a robust and easy-to-calculate mathematical model for estimating bank performance using stepwise regression and TOPSIS methods. The TOPSIS ranking of banks from the best to the worst allows establishing that the bank with the highest mean score is Akbank (AB), while Ziraat Bank (ZB) and Garanti Bank (GB) follow AB over the period. The results of the stepwise regression analysis show that managing non-performing loans and expenses (both personnel and interest expenses) are critical to high performance in the banking sector.

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    • Figure 1. Performance scores for the second stage
    • Table 1. Turkish banks included in the study
    • Table 2. Financial performance criteria
    • Table 3. Descriptive statistics of financial ratios (criteria)
    • Table 4. Performance scores of the first stage
    • Table 5. Rankings of banks at the first stage
    • Table 6. Stepwise regression analysis results
    • Table 7. Diagnostic test results
    • Table 8. Stationarity test results
    • Table 9. Performance scores of the second stage
    • Table 10. Second stage rankings of banks