Combining Time Series Analysis and Multi Criteria Decision Making Techniques for Forecasting Financial Performance of Banks in Turkey


ÖNDER E., HEPŞEN A.

International Conference on Applied Business & Economics (ICABE) - NEW YORK, United States Of America, 1 - 04 October 2013, vol.1, no.1, pp.129

  • Publication Type: Conference Paper / Full Text
  • Volume: 1
  • Country: United States Of America
  • Page Numbers: pp.129
  • Istanbul University Affiliated: Yes

Abstract

Forecasting  plays  a  major  role  in  financial  planning  and  it  is  an  essential  analytical  tool  in
banks’  strategies.  In recent  years,  researchers  are developing  new techniques  for  estimation.
Financial  performance  evaluation  of  banks  is  a  kind  of  multi-criteria  decision  making
(MCDM) problem which has developed rapidly. It is  very important for a  firm to monitor a
wide range of performance indicators in order to ensure that appropriate and timely decisions
and  plans  can  be  made.  Suitable  performance  measures  can  ensure  that  managers  adopt  a
long-term perspective and  allocate  the  company’s  resources  to  the  most  effective  activities.
The aim of this study is to evaluate the financial performance model  of Turkish Banks during
2012-2015  using forecasting (based  on 2002-2011  data)  methods  and  multi  criteria  decision
techniques.  As  forecasting  analysis  tools,  classical  time  series  methods  such  as  moving
averages,  exponential  smoothing,  Brown's  single  parameter  linear  exponential  smoothing,
Brown’s  second-order  exponential  smoothing,  Holt's  two  parameter  linear  exponential
smoothing  and  decomposition  methods  applied  to  financial  ratios  data.  After  forecasting
techniques  Analytical  Hierarchy  Process  (AHP)  and  Technique  for  Order  Preference  by
Similarity  to  Ideal  Solution  (TOPSIS)  methodologies  are  used  for  the  outranking  of  banks.
This model is applied to a case study for the financial performance evaluation of 3 state banks
(Ziraat  Bank,  Halk  Bank  and  Vak$flar  Bank);  9  private  banks  (Akbank;  Anadolubank;
Sekerbank;  Tekstil  Bank;  Turkish  Bank;  Turk  Ekonomi  Bank;  Garanti  Bank;  Is  Bank  and
Yap$  Kredi  Bank)  and  5  foreign  banks  (Denizbank;  Eurobank  Tekfen;  Finans  Bank;  HSBC
Bank  and  ING  Bank)  in  Turkey.  Total  performance  of  bank  is  divided  into  ten  groups
including  Capital  Ratios,  Balance  Sheet  Ratios,  Assets  Quality,  Liquidity,  Profitability,
Income-Expenditure  Structure,  Share  in  Sector,  Share  in  Group,  Branch  Ratios  and  Activity
Ratios as described by the Banks Association of Turkey.
Keywords: Financial Performance Evaluation,  Analytical Hierarchy Process (AHP),  TOPSIS
Method,  Turkish  Banking  Sector,  Multi  Criteria  Decision  Making,  Forecasting,  Time  Series
Analysis