Determinants of Banks’ Profitability in the Provinces of Iran with an Emphasis on the Transition Effect of Economic Growth: GMM Dynamic Panel Data Method
Subject Areas : Financial Economics
Fatemeh saati
1
(Department of Economics, Qeshm Branch, Islamic Azad University, Qeshm, Iran)
Mohammad Mohebi
2
(Department of Economics, Faculty of Management and Economics, Hormozgan University, Bandar Abbas, Iran)
Seyyed Yaqoub Zarem of Kish
3
(Department of Economics, Research Science Unit, Islamic Azad University, Tehran, Iran)
Ebrahim negahdari
4
(Department of Economics,Faculty of Humanities, Bandar Abbas Branch, Islamic Azad University,Bandar
Abbas,Iran)
Keywords: Banking, Bank Profitability, Generalized Moments Method (GMM), Iran Economy.,
Abstract :
According to the important role of the banking industry in the economic development on one hand, and the importance of bank profitability as a necessity for the banks success on the other hand, this study tries to examine of the determinants of bank profitability in Iran provinces, emphasizing the transitional effect of economic growth during 1385-1397 applying GMM method. The results show that monetary policy and economic growth have positive effects, and inflation and nonperforming of loans have negative effects on the banks' profitability. In addition, the effect of the economic growth on the relationship between monetary policy and bank the profitability is positive. However, the effect of the granted loans is small and ignorable. Accordingly, it is suggested that policymakers increase the economic growth and reduce the inflation, and banks, instead of increasing their loans, check the credit status of the borrowers more closely and thus reduce credit risk.