The effect of institutional variables on financial stability banking system

Gudarzi Farahani, Yazdan; Morsaliarzanagh, Zoleikha; Abbasi, Ebrahim; Mehrara, Mohsen

doi:10.22126/pse.2024.10463.1113

The effect of institutional variables on financial stability banking system

Document Type : Original Article

Authors

¹ Assistant Professor, Department of Islamic Economics, Faculty of Economic and Administrative Sciences, Qom University

² Department of Accounting and Management, Islamic Azad University, Karaj Branch, Karaj, Iran

³ استاد گروه مدیریت مالی، دانشکده علوم اجتماعی و اقتصادی دانشگاه الزهرا, تهران، ایران

⁴ استاد گروه اقتصاد، دانشکده اقتصاد، دانشگاه تهران, تهران، ایران

10.22126/pse.2024.10463.1113

Abstract

The purpose of this study was to investigate the effect of institutional variables on financial stability in the country's banking system. For this purpose, the statistical information of the country's banking system in the period of 2010-2023 and the panel data method were used. In order to estimate this relationship, diagnostic tests were performed on the research variables and finally the experimental model was estimated using the panel data method with fixed effects. The obtained results indicated that the banking concentration index had a positive and significant effect on banking stability. The estimated coefficient is equal to 0.24. Based on this, with the stability of other conditions, a one percent increase in banking concentration leads to an increase in banking stability by 0.24 percent. The indicator variables of the ratio of non-current claims to total facilities and the number of bank branches have a negative and significant effect on bank stability, but the variables of ROA and ROE profitability indicators, the ratio of risk-weighted assets to the total assets of the bank and the ratio of facilities and deposits to the total Bank assets have had a positive and significant impact on banking stability. The purpose of this study was to investigate the effect of institutional variables on financial stability in the country's banking system. For this purpose, the statistical information of the country's banking system in the period of 2010-2023 and the panel data method were used. In order to estimate this relationship, diagnostic tests were performed on the research variables and finally the experimental model was estimated using the panel data method with fixed effects. The obtained results indicated that the banking concentration index had a positive and significant effect on banking stability. The estimated coefficient is equal to 0.24. Based on this, with the stability of other conditions, a one percent increase in banking concentration leads to an increase in banking stability by 0.24 percent. The indicator variables of the ratio of non-current claims to total facilities and the number of bank branches have a negative and significant effect on bank stability, but the variables of ROA and ROE profitability indicators, the ratio of risk-weighted assets to the total assets of the bank and the ratio of facilities and deposits to the total Bank assets have had a positive and significant impact on banking stability.

Keywords