Capital Bank, liquidity Risk and Credit in Iran's banks

Amir Ali Farhang (), Abolgasem Esnaashari (), Asghar Abolhasani (), Mohamad Reza Rannjbar Fallah () and Jahangir Biabani ()
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Amir Ali Farhang: Assistant Professor of Economics, Payame Noor University
Abolgasem Esnaashari: Associate Professor of Economics, Payame Noor University
Asghar Abolhasani: Associate Professor of Economics, Payame Noor University
Mohamad Reza Rannjbar Fallah: Assistance Professor of economics, Payame Noor University
Jahangir Biabani: Associate Professor of Economics, Payame Noor University

Quarterly Journal of Applied Theories of Economics, 2019, vol. 5, issue 4, 247-270

Abstract: The present study investigates the effect of capital on liquidity and credit risks in the banking industry of Iran using a GMM system. Eviews9 and stata12 software have been used to carry out this research. The research findings show that there is a significant and significant correlation between bank capital and risk in the banking industry of Iran, so that by increasing the capital of a bank by as much as one percent, the liquidity risk on the basis of various indexes can decrease from 0/1% to 0/4% Find out. In the case of credit risk, the increase in bank capital leads to a reduction in credit risk from 5/7 to 6/8 percent. Based on the findings of this research and tests, the ethical hazard theory in the banking industry is confirmed. And the charter theory regarding the banking system of Iran is not approved. In this study, the size of the bank shows a direct and significant relationship with liquidity risk, so that a unit of increase in the bank's size index has increased the risk of liquidity from 0/003 to 0/008. There is also a meaningful relationship between the variables of economics and the risk of liquidity and credit. The results of the research also suggest that risk management in banks depends not only on internal banking factors, but also on macroeconomic factors

Keywords: Bank capital; Moral Hazard theory; Charter Value theory; SGMM (search for similar items in EconPapers)
JEL-codes: C26 E59 G32 (search for similar items in EconPapers)
Date: 2019
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