Modeling of Political Communications of the Board of Directors and Credit Risk Empirical Evidence of Iran's Interest-Free Banking System (Dynamic Panel Data Approach

Subject Areas : business management

Ali  Heydari ¹ (-Department of Finance, Central Tehran Branch, Islamic Azad University, Tehran, Iran.)
Ezatullah  Abbasian ² (Department of Public Management, Faculty of Management, University of Tehran, Tehran, Iran)
Farzaneh  KHalili ³ (Department of Economy, Abhar Branch, Islamic Azad University, Zanjan, Iran)

Received: 2020-11-20 Accepted : 2020-12-08 Published : 2020-12-21

Keywords: Credit Risk, Modeling, Dynamic Panel Data Approach, Political Communications, Boards, Iran Interest-free Banking System,

Abstract :

The purpose of This study attempts to investigate the effects of interactions between politically connected CEO (PCCEO), independent directors, and credit risk of banks in an emerging country. It has been widely stated in the theoretical literature that political connections increase the value of organizations. Political connections may have a positive or negative effect on the performance of the bank. answering the question of whether banks' political connections have a positive or negative impact on their financial performance cannot be answered with certainty. In this study, commercial banks include 16 banks for the period 1390-1396. To collect the required data for the banks listed on the Tehran Stock Exchange, the database of Codal publishers was used. The information contained in the performance report of Iranian banks collected by the Higher Institute of Banking of Iran was also used. For investigation of this issue, we employ the SGMM method (System Generalized Method of Moments) or in other words, dynamic GMM approach, and we find politically connected boards to exert significant influence on credit risk.