Corporate Governance and Credit Risk in Iranian Banking Industry

Saber Akbarian (), Ali Asghar Anvary Rostamy (), Nader Rezaei () and Rasool Abdi ()
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Saber Akbarian : Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran
Ali Asghar Anvary Rostamy : Department of Planning & Management, Tarbiat Modares University, Tehran, Iran
Nader Rezaei : Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran
Rasool Abdi : Department of Accounting, Bonab Branch, Islamic Azad University, Bonab, Iran

Journal of Money and Economy, 2019, vol. 14, issue 1, 85-100

Abstract: The primary purpose of this research is to investigate the impacts of corporate governance on credit risk in the Iranian banking industry. The sample consists of 20 banks listed on the Tehran Stock Exchange during 2011-2016, using panel data. In this research, credit risk and corporate governance are the dependent and independent variables, respectively. The meta-synthesis method was used for compiling a checklist of corporate governance indicators. Then, the content analysis method was applied for measuring the corporate governance index; i.e., the number of dimensions disclosed on the total number of disclosable dimensions. The results indicate that after adjusting the control variables namely the size, the financial leverage, the ratio of capital adequacy, the GDP and inflation, there is a significant negative relationship between corporate governance quality and the credit risk, which means more effective corporate governance will reduce information asymmetry, increases the clarity and stakeholder confidence, and finally reduces banks’ credit risk. Accordingly, the final recommendation is to reduce credit risk by improving the mechanisms of corporate governance in the Iranian banking industry.

Keywords: Banking Industry; Credit Risk; Corporate Governance; Tehran Stock Exchange (search for similar items in EconPapers)
JEL-codes: G21 G32 G34 (search for similar items in EconPapers)
Date: 2019
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