Document Type : Research Paper
Authors
1
Ph.D. in Economics, Researcher, Central Bank of the Islamic Republic of Iran, Department of Inquiry and Qualification Assessment. Tehran, Iran
2
Professor of Economics, Faculty of Economics and Political Science, Shahid Beheshti University, Tehran, Iran,
3
Associate Professor of Economics, Faculty of Economics, Allameh Tabataba'i University, Tehran, Iran
4
Associate Professor, Department of Economics, Central Tehran Branch, Islamic Azad University, Tehran, Iran
Abstract
Bank lending, as one of the fundamental components of banking operations, plays a significant role in determining the profitability level of financial institutions. This research aims to investigate the effects of lending on the profitability of banks listed on the Tehran Stock Exchange. Using data from 20 banks over the period 2011–2023 and employing quantile regression with fixed effects, the results indicate that the coefficient of the LOAN variable, incorporating a dummy variable for banks with high lending levels, becomes statistically significant (coefficient 0.0369, p-value 0.028). This finding suggests a positive and significant relationship between lending and profitability in Iranian listed banks after controlling for group differences. The deposit-to-assets ratio (coefficient -0.0530) and non-performing loans (coefficient -0.8145) exhibit negative and significant effects on profitability at the 1% significance level. Bank size shows a negative effect at the 10% level, while money supply growth demonstrates a positive effect at the same significance level. The Pseudo R² value of 0.356 indicates the high explanatory power of the model. The findings highlight non-performing loans as one of the most critical threats to the profitability of Iranian banks, emphasizing that efficient credit risk management can substantially contribute to improving bank performance. It is suggested that the Central Bank, within a risk-based supervision framework, adopt a differentiated approach by tailoring regulatory requirements to each bank's lending level and risk profile. Furthermore, bank managers can enhance their returns by optimizing asset composition and focusing on lending quality.
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