Investigating the impact of inflation and stock market index on bank profitability (Case study of Karafin, Eghtesad-e Novin and Saman Banks)

Subject Areas : Financial Economics

Reza Rahimi ¹ , Ali Akbar Baghestany ²

1 - Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran (corresponding
2 - Agricultural Planning, Economic and Rural Development Research Institute (APERDRI). Tehran. Iran

Received: 2023-09-29 Accepted : 2023-12-02 Published : 2023-12-22

Keywords: Bank, Economy, Stock market, Key Words: Inflation, E64, Iran. JEL classification: E52,

Abstract :

AbstractBanks are economic units that affected by shocks. Because their sources and expenses are affected by the impact of unexpected economic shocks. This study investigates and analyzes the effects of inflation and changes in the stock exchange index on the profitability of three selected banks, Karafin, Eghtesad-e Novin and Saman Banks during the period of 2014-2015 using panel data. The results of the F-Limer indicated that the possibility of estimating the model using the Panel data method is confirmed with 95% confidence. In order to detect the presence of fixed effects or the random effects, Hausman's test was used. The results of the Hausman test showed that the research model is panel data with fixed effects. The results of the model estimation indicate that the economic growth and the growth of the stock exchange index have a positive and significant effect on the profitability of the selected banks. On the other hand, the increase in the general level of prices (inflation) has reduced the profitability of banks. Therefore, it is suggested that the production sectors such as agriculture and industry should be prioritized for financing by banks. So that the economic growth is realized by increasing the supply side of the economy and the profitability of the banks is strengthened by both the economic growth and the reduction of inflation.

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