Analysis of the Relationship Between Capital Adequacy and Profitability in Turkish Banking Sector Over the Period of 1980-2017; Fourier Approach

The relationship between capital adequacy and profitability has great importance and has been studied widely. The effects of the capital adequacy requirements on bank performance and the volume of these effects are important issues studied. Financial crises experienced in U.S.A and E.U since 2008 have led to the detailed examination of the role of the capital inadequacies in crises. When analysed the Turkish Banking Sector, high capital adequacy and profitability ratios have been standing out, compared to the other banks operating in the other developed and developing market economies. The purpose of this study is to test the relationship between capital adequacy and profitability in the banking sector during the period of 1980-2017 by using the annual data of Turkish banking sector. Dependent variables as ROE and NIM and independent variables as equity/total assets ratio and equity/deposit+non-deposit sources have been used in this study. The results of the study shows that there are long-term relationships between capital adequacy ratios and profitability indicators