Does financial innovation improve performance: Case study of Turkey

Abstract

The mutual funds’ performance over time can be driven by a number of dynamic determinants including financial innovation. In fact, financial innovation can be considered as a key factor for improving the performance and increasing the profitability of mutual funds. The purpose of this study is to examine the process of financial innovation in Turkey and its role in accelerating the development and improvement of the performance of the mutual funds industry. This study provides a framework to analyze and evaluate the developments in financial practices over the eight-year period from 2011 to 2018. The process of financial innovation is defined as new financial products and services. Based on panel analysis it is observed that the activity of mutual funds responded to a great extent to innovative market forces.

Keywords:

• Mutual funds’ performance
• financial innovation
• panel analysis

PUBLIC INTEREST STATEMENT

Interest in mutual funds has a long history; at the present time mutual funds are primary tools for investors through which they can invest their funds in various securities of their choice such as bond, equity, natural resources (gold) or real estate, etc. Investors are naturally interested on major factors influencing the mutual fund’s performance over time. In this study, we develop a new model that hypothesizes the relationship between financial innovation and fund performance. Statistical experiments are designed to prove that trends in financial services such as internet banking, mobile banking, future contracts, bank branches and research and developments in financial sector in Turkey in fact improves performance of the funds.

Additional information

Funding

The author received no direct funding for this research.

Notes on contributors

Tarana Azimova

Tarana Azimova has graduated her Doctoral Degree Business Administration: Finance from Istanbul University. She is currently an Assistant Professor in Business Administration Department at Aydın University, where she delivers various finance and economic related courses. Tarana Azimova has previously worked at Nisantasi University, Khazar University as an Adjunct Professor, where she delivered various financial courses such as Investments, International Finance and Corporate Finance. Her primary area of interest is Finance and Economics and she is the author of different articles in risk management, innovations in financial markets, and bond markets among others.