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Corporate Governance and Credit Risk in Iranian Banking Industry

Author

Listed:
  • Akbarian , Saber

    (Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran)

  • Anvary Rostamy , Ali Asghar

    (Department of Planning & Management, Tarbiat Modares University, Tehran, Iran)

  • Rezaei , Nader

    (Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran)

  • Abdi , Rasool

    (Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran)

Abstract

The primary purpose of this research is to investigate the impacts of corporate governance on credit risk in the Iranian banking industry. The sample consists of 20 banks listed on the Tehran Stock Exchange during 2011-2016, using panel data. In this research, credit risk and corporate governance are the dependent and independent variables, respectively. The meta-synthesis method was used for compiling a checklist of corporate governance indicators. Then, the content analysis method was applied for measuring the corporate governance index; i.e., the number of dimensions disclosed on the total number of disclosable dimensions. The results indicate that after adjusting the control variables namely the size, the financial leverage, the ratio of capital adequacy, the GDP and inflation, there is a significant negative relationship between corporate governance quality and the credit risk, which means more effective corporate governance will reduce information asymmetry, increases the clarity and stakeholder confidence, and finally reduces banks’ credit risk. Accordingly, the final recommendation is to reduce credit risk by improving the mechanisms of corporate governance in the Iranian banking industry.

Suggested Citation

  • Akbarian , Saber & Anvary Rostamy , Ali Asghar & Rezaei , Nader & Abdi , Rasool, 2019. "Corporate Governance and Credit Risk in Iranian Banking Industry," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 14(1), pages 85-100, January.
    • Handle: RePEc:mbr:jmonec:v:14:y:2019:i:1:p:85-100
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    References listed on IDEAS

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    More about this item

    Keywords

    Banking Industry; Credit Risk; Corporate Governance; Tehran Stock Exchange;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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