The role of banking crisis in the effect of income diversity on profitability of banking industry in Iran

Subject Areas : Financial Knowledge of Securities Analysis

Nesa Kamalian ¹ , Farshid pourshahabi ² , azim nazari ³

1 - Department of Economics, Faculty of Humanities, University of Bojnord
2 - استادیار گروه اقتصاد دانشگاه بجنورد
3 - Assistant Professor of economics in university of Bojnourd

Received: 2021-05-04 Accepted : 2021-05-04 Published : 2021-02-19

Keywords: Income diversity, Profitability and banking Cris,

Abstract :

In the last three decades, the Iranian economy has faced many vicissitudes in macroeconomic areas such as the banking industry. Analysis of the dominant condition of Iran’s banking system indicates that although it has not practically resulted in an explicit crisis due to the state-owned banks and the central bank's financial support, the Iranian economy has experienced a banking crisis. The main objective of the current study is to examine the role of banking crisis in the effect of Income diversity on Profitability of banking industry using panel econometric method) EGLS .(For this purpose, 8 accepted banks in the Tehran Stock Exchange were evaluated as a research statistical population during 2005-2015. The results show that an increase in the share of Non-interest income in the time of banking crisis has a significant negative effect on return on equity. However, there is a significant positive relationship between the ratio of lending facilities to bank assets and return on equity during times of banking crisis. This means that in times of banking crisis, generating interest income is more efficient for the banks than diversifying their activities and investments. The results also suggest that variables of capital adequacy and efficiency in times of banking crisis have significant positive effect on return on equity, but on the other hand, the degree of bank concentration (Lerner) in times of banking crisis has significant negative effect on return on equity.

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