The Relationship between Credit Risk Management and Micro Macro Variables with Financial Performance: Analysis of Turkish Deposit Banks (2012-2022)

Abstract

The functionality of financial markets is extremely important for the economic development and sustainability of countries. Banks play an important role in financing economic growth and are vital elements of economic activity. Banks provide significant support for the functionality of the financial system by transferring the needed funds from those who supply them to those who demand them. This situation only makes sense with a well-functioning credit mechanism and the use of the most suitable loans for the most appropriate investments. However, what is more important is to ensure that the resources transferred to the system as loans are returned in the form of interest and principal on maturity. However, credit risk will come to the fore for loans that are expected to not be repaid on maturity. Credit risk is the possibility of the bank suffering losses if the debtor does not fulfil his payments as promised. Non-performing loans reduce banks' profits and equity capital, which may cause the bank to fail to fulfil its obligations and may even lead to bankruptcies. The banking sector is a group of institutions that coordinates the real economy and the financial system and ensures macroeconomic stability and sustainability. In this study, hierarchical regression analysis was applied to examine the mediation status of AQ, NIM, LLP, BSIZE, INF and AGE indicators in the relationship between ROA and ROE and NPL, KO, CAR, MP, LR. As a result, it has been observed that NPL, KO, CAR, MP and LR levels, which have a direct effect on ROA and ROE levels, are indirectly affected by AQ, NIM, LLP, BSize, INF and AGE levels, which are considered to be indirect effects. Although it is stated that there is a mediation effect in both models, the fact that not all variables are included in the model can be expressed as an indication that the relationship has partial mediation.