Sustainability of Iranian Banks: Role of Financial and Non-Financial Determinants

Emad Nobahar (), Mahmoud Dehghan Nayeri () and Adel Azar ()
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Emad Nobahar : Tarbiat Modares University
Mahmoud Dehghan Nayeri : Tarbiat Modares University
Adel Azar : Tarbiat Modares University

Journal of Money and Economy, 2019, vol. 14, issue 4, 495-524

Abstract: This study aimed to investigate the role of financial and non-financial determinants of the sustainability of Iranian banks. Accordingly, the sustainability score of 27 public and private Iranian banks were evaluated in 2017 by employing a sustainability model. The model was developed by the acquisition of sustainability codes, themes, and categories in the banking industry through Meta Synthesis, while its casual structure was determined by a combined method of Interpretive Structural Modeling and Analytical Network Process. Subsequently, we calculated the sustainability scores by using our proposed model to analyze the content of the banks’ disclosed information. Then, the effect of capital adequacy, total assets, financial leverage, loan to deposit ratio, return on assets and number of branches were investigated using multiple regressions on the banks' sustainability scores. Findings depict that total assets have a positive and significant relationship and capital adequacy has a negative and significant relationship with a bank's sustainability. Therefore, banks with more assets are more willing to participate in sustainability activities, due to more appropriate financial resources, as well as to support the bank's brand and its reputation to stakeholders. On the other hand, due to the wrong belief that sustainability is costly, and non-value adding for the banks, they get less involved in order to increase their capital adequacy ratio.

Keywords: Bank Sustainability; Financial Determinants; Regression (search for similar items in EconPapers)
JEL-codes: C02 G21 G32 (search for similar items in EconPapers)
Date: 2019
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