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Capital Bank, liquidity Risk and Credit in Iran's banks

Author

Listed:
  • Farhang, Amir Ali

    (Assistant Professor of Economics, Payame Noor University)

  • Esnaashari, Abolgasem

    (Associate Professor of Economics, Payame Noor University)

  • Abolhasani, Asghar

    (Associate Professor of Economics, Payame Noor University)

  • Rannjbar Fallah, Mohamad Reza

    (Assistance Professor of economics, Payame Noor University)

  • Biabani, Jahangir

    (Associate Professor of Economics, Payame Noor University)

Abstract

The present study investigates the effect of capital on liquidity and credit risks in the banking industry of Iran using a GMM system. Eviews9 and stata12 software have been used to carry out this research. The research findings show that there is a significant and significant correlation between bank capital and risk in the banking industry of Iran, so that by increasing the capital of a bank by as much as one percent, the liquidity risk on the basis of various indexes can decrease from 0/1% to 0/4% Find out. In the case of credit risk, the increase in bank capital leads to a reduction in credit risk from 5/7 to 6/8 percent. Based on the findings of this research and tests, the ethical hazard theory in the banking industry is confirmed. And the charter theory regarding the banking system of Iran is not approved. In this study, the size of the bank shows a direct and significant relationship with liquidity risk, so that a unit of increase in the bank's size index has increased the risk of liquidity from 0/003 to 0/008. There is also a meaningful relationship between the variables of economics and the risk of liquidity and credit. The results of the research also suggest that risk management in banks depends not only on internal banking factors, but also on macroeconomic factors

Suggested Citation

  • Farhang, Amir Ali & Esnaashari, Abolgasem & Abolhasani, Asghar & Rannjbar Fallah, Mohamad Reza & Biabani, Jahangir, 2019. "Capital Bank, liquidity Risk and Credit in Iran's banks," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 5(4), pages 247-270, February.
    • Handle: RePEc:ris:qjatoe:0135
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    More about this item

    Keywords

    Bank capital; Moral Hazard theory; Charter Value theory; SGMM;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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