Abstract
Although banks occupy a central role in most (post-)conflict situations, there is a perplexing lack of attention to them in studies of political violence. As a case experiencing domestic conflict with varying degrees in the last decades, Turkey offers opportunities to understand how the banking sector, including state deposit banks, responds to such political violence. We focus on the short-term impact of political violence and address the following questions: Do all actors in the sector respond in similar ways to security threats? Is there variation according to conflict intensity? We shed light on these puzzles with an analysis of original data on bank ownership, bank branches, bank deposit amounts, and bank credits. We show that banks with profit incentives respond to conflict by lowering their presence in provinces hit by these attacks. In comparison, our finding that deposits in high conflict intensity areas are not affected suggests that it is indeed economic actors outside high intensity regions that are more sensitive to short-time changes in security compared to local ones. Overall, the results demonstrate that political violence hurts banks’ presence in conflict locations and their presence matters through credit provision to these areas.
Important figures
Figure 1. Number of banks (by ownership) and bank branches.
Figure 2. Bank branches and terror across Turkey.
Figure 3: Coefficient plots for non-state bank branches and deposits.
Figure 4: Coefficient plots for state bank branches and deposits.
Figure 5: Predicted values of bank branches estimated from Online Appendix Table 7 and Online Appendix Table 8.
Figure 6: Predicted values of deposits estimated from Online Appendix Table 7 and Online Appendix Table 8.
Figure 7: Coefficient plots for credits.
Citation
@article{ari_et_al_2024,
Author = {Emine Arı and Reşat Bayer and Özge Kemahlıoğlu},
Doi = {10.1080/09546553.2023.2252104},
Journal = {Terrorism and Political Violence},
Pages = {1083--1104},
Title = {Breaking the bank: Effects of domestic conflict on the banking sector in Turkey},
Year = {2024}}