Examining the Effective Factors on Commercial Bank Profitability of Iran Using Panel ARDL Method

Subject Areas : Financial engineering

Iraj Shariatzadeh ¹ , Mehdi Shabanzadeh ² , Gholamreza Zomorodian ³

1 - Faculty of Business Administration Faculty of Management, Islamic Azad University Central Tehran
2 - PhD students in Agricultural Economics, Faculty of Agricultural Economics,University of Tehran, Iran, Tehran
3 - Faculty of Business Administration Faculty of Management, Islamic Azad University Central Tehran

Received: 2016-04-05 Accepted : 2016-05-14 Published : 2016-12-21

Keywords: profitability, Comerical Banks, Return of Assets, Equity Ratio, Credit Risks, Panel ARDL Methods,

Abstract :

In any economic system the role of banks to collect deposits of the banking system (Procurement of resource) and its application in the financing of investment projects (allocation of resource) is very important. Nowadays, Expansion of global markets and increase competition in the markets for financial services is affected the profitability of the banking industry, significantly. Given that the profitability of banks is one of functions of banks and a more profitable bank has more power to deal with negative shocks to the market, Therefore, attention to the profitability index as one indicator of evaluating the performance of the banks and its role in decisions related to the mobilization of resources, financing and resource allocation is essential. in this study To achieve this goal, the affective factors on profitability of commercial banks has been modeled and studied during 2009-2013. The scope of this study contains 8 commercial banks listed on Tehran Stock Exchange including Eghtesade Novin, Parsian, Karafarin, Pasargad, Mellat, Tejarat, Saderat and Sina. The study also is used the Panel ARDL method to achieve the targets. The results of this study showed that, The ratio of shareholders' equity to assets, The ratio of credit to assets, bank size and inflation have a direct and positive effect on the profitability of commercial banks. So, increasing and improvement of this variables increase the profitability of commercial banks in the short term and long term. However, the effect of credit risk on commercial bank's profitability index is negative. So that increasing of this variable deacrease the profitability of commercial banks in the short term and long term. finally, The results of ECM model reveal that the speed of adjustment towards long-run equilibrium is low, So that if the shock enters the model the long time require for correct the short-run and long-run imbalance equilibrium and back model to first equilibrium.