Investigating the Effect of Exchange Rate Risk and Economic Growth Rate on Banks' Performance

Document Type : Research Paper

Authors

1 MSc. Student of Economics (Islamic Banking), Faculty of Economics, University of Tehran, Tehran, Iran

2 Professor, Department of Economics, University of Tehran,Tehran, Iran

Abstract

Due to the insufficient development of the capital market and the inefficiencies in this market, the banking industry in Iran is responsible for the long-term and short-term financing of enterprises through the provision of facilities. In recent years, the banking industry has faced several challenges, the most important of which is non-current receivables. In this study, the effect of exchange rate risk and economic growth rate on the performance of banks in the dimension of non-current receivables in the period 2008-2018 has been investigated. The statistical population of the study is all banks in the country, of which 15 banks have been selected as a sample based on the availability of their data. After ensuring the significance of the research variables, the estimation of the econometric model was performed by ordinary least squares models and fixed effects, as well as by panel data technique using the generalized torque model. Findings showed that the exchange rate risk variable had a positive and significant effect on non-current receivables of the studied banks and also the variables of economic growth rate and facility interest rate had a negative and significant effect on non-current receivables. Among the variables, the remaining three variables, the ratio of receivables of a previous period, the exchange rate risk variable and the facility interest rate, had the most impact on the dependent variable. The findings of this study can be effective in moving banks to pay more attention to variables affecting receivables and improve their performance.

Keywords

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Iranian Journal of Agricultural Economics and Development Research
Volume 52, Issue 2
May 2021
Pages 389-404

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