Capital Adequacy Ratio and Financing Behavior in Iran’s Banking System

Zahra Afshari () and Mahsa Bagherzadeh ()
Additional contact information
Zahra Afshari : Faculty of the Social Sciences and Economics, Alzahra University
Mahsa Bagherzadeh : Faculty of the Social Sciences and Economics, Alzahra University

Journal of Money and Economy, 2017, vol. 12, issue 3, 235-249

Abstract: For Iran as an oil exporter country, heavy reliance on the extractive sector for generating fiscal revenues and export earnings translates into increased vulnerabilities to oil price shocks. The structure of the economic policy, and the banking systems make macroprudential policy a particular relevant tool for Iran. The capital adequacy is a macro prudential instrument used to maintain the stability of Iranian financial system by considering the bank capital condition. This paper examines the impact of capital adequacy on financing behavior in Iranian banking system. The paper uses generalized method of moment estimation (GMM) technique and by employing bank-level data for both public and private banks covering the period 2003-2016, we analyze the reaction of bank financing behavior toward capital adequacy policy. The findings indicate that capital adequacy ratio is observed to be effective in curtailing financing behavior of banking institutions. Furthermore, the results reveal that the impact of capital adequacy in managing credit expansion of private banks was greater than public banks.

Keywords: Macroprudential; Banking System; Financing Behavior; Iran; GMM (search for similar items in EconPapers)
JEL-codes: E59 E69 G29 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://jme.mbri.ac.ir/article-1-305-en.pdf (application/pdf)
http://jme.mbri.ac.ir/article-1-305-en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mbr:jmonec:v:12:y:2017:i:3:p:235-249

Access Statistics for this article

More articles in Journal of Money and Economy from Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran Contact information at EDIRC.
Bibliographic data for series maintained by M. E. ().