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Investigating the simultaneous effects of stability and profitability in the Iranian banking system (emphasis on different methods of measuring the stability index)
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Mahshid Shahchera *1   |
| 1- MBRI |
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Abstract: (127 Views) |
This paper examines the simultaneous effects of stability and profitability in the Iranian banking system during the years 2016-2023. We analyzes the simultaneous dynamics of profitability and stability in the Iranian banking system with emphasis on how to calculate various banking stability indicators. In this research, the z_score index is used as a stability index and return on assets as a profitability variable, and the method of dynamic generalized moments is used to estimate relationships in a system of simultaneous equations. This paper addresses the importance of this issue by changing the calculation method for the banking stability index by considering return on assets, return on equity, and risk- weighted assets. Therefore, this research attempts to determine an appropriate index to display banking stability and then present a model along with other factors and variables affecting the banking system. The findings show that in the Iranian banking system, the relationship between profitability and banking stability in the simultaneous equations system is positive and significant, and given the diversity of the calculation of the banking stability index (return on assets, return on capital, and risk-adjusted assets), the impact of banking stability on profitability in the case of calculating this index with return on capital is greater than in other cases. The higher impact of banking stability on profitability in the case calculated by return on equity indicates that gaining the trust of shareholders and focusing on effective capital management play a key role in improving the stability of the banking system.
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Article number: 6 |
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Type of Study: Empirical Study |
Subject:
Money and Interest Rates (E4)
Received: 2025/01/18 | Accepted: 2025/05/25 | Published: 2025/06/5
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