lala

The impact of Internet-Banking on Bank Profitability-
The Case of Turkey

Assist. Prof. Dr. Ceylan Onay
Bogazici University
Hisar Campus, MIS Department, Bebek 34342, Istanbul
Phone: [phone]; Fax: [phone]
E-mail: [e-mail]

Assist. Prof. Dr. Emre Ozsoz
Fashion Institute of Technology, SUNY
Social Sciences Dept., 27th St. at 7th Ave, New York, NY
Phone: [phone]; Fax: [phone]
Email: [e-mail]

Assist. Prof. Dr. Aslı Deniz Helvacıoğlu
Bogazici University
Hisar Campus, International Trade Department, Bebek 34342, Istanbul
Phone: [phone]; Fax: [phone]
E-mail: [e-mail]

The increased adoption and penetration of Internet has recently redefined the playground for retail banks. The retail banks are now offering their services majorly through their internet branches. However, the effect of internet banking on bank performance mainly on the bank profitability has remained an unstudied issue. The objective of this paper is to examine the impact of internet-banking on financial performance of Turkish banks following the approach of Hernando and Nieto (2007).

Our analysis covers thirteen banks that have adopted online banking in Turkey between 1996 and 2005. By using bank specific and macroeconomic control variables, we investigate the impact of internet banking on the return on assets(ROA) and equity(ROE), the interest spread, overhead expenses and on commission and fee income controlling for systemic bank crises in the country during the timeframe. Our study includes time-lagged measures of internet banking adoption to exhibit the changes in effect over time.

Our results show that internet banking starts contributing to banks’ ROE with a time lag of two years confirming the findings of Hernando and Nieto while a negative impact is observed for one year lagged dummy. For the intermediation spread and commission and fee income our estimations fail to provide any

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