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Income diversification and resilience in Iranian banks usingPrincipal Component Analysis (PCA) Method
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Mir Sajjad Mosajed Mousavi1   , Mahshid Shahchera2 , ELHAM DASHTY RAHMAT ABADY *1 |
1- Iranian Higher Education Institute
2- Monetary Banking Research Institue |
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Abstract: (767 Views) |
The purpose of this study is to create an index to measure the resilience of Iranian banks and to investigate the impact of income diversification and some economic, banking and industrial factors on it. The selected sample includes Iranian banks in the years 2007 to 2020. Variables of each of the sub-index Camels Standard were chosen and after compounding them with the principal components Analysis Method, a index was designed to measure the Resilience of banks. Then we used the Generalized Method of Moments to examine the impact of diversification on income as an independent variable on the synthetic index of Resilience in forms of linear and non-linear.
The results revealed that diversification in revenue has a significant positive linear effect on Resilience; but there was a reverse U-shaped impact in a non-linear relationship with the Resilience. A significant positive correlation was observed between the size of the bank's risk index, the ratio of loans to total assets and economic growth with Resilience, a negative and significant relationship was found between the ratio of deposits to total assets, industry concentration index and inflation and Resilience.
The results illustrate that a moderate increase in diversification enhances the Resilience of banks but increasing it too much will backfire.
Creating a synthetic index to measure resilience and examining linear and nonlinear relationships of income diversification on it is one of the aspects of increasing knowledge in research.
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Full-Text [PDF 1230 kb]
(227 Downloads)
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Type of Study: Case Study |
Subject:
Financial Institutions and Services (G2)
Received: 2021/10/31 | Accepted: 2023/03/4 | Published: 2023/05/1
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