Evaluating the Effects of Scope Economies of Diversification of Deposits on Return and Risk Criteria in Selected Banks of Tran

Moharam Joudi, Nazila

doi:10.22034/jifb.2023.184060

Evaluating the Effects of Scope Economies of Diversification of Deposits on Return and Risk Criteria in Selected Banks of Tran

Document Type : Original Article

Author

nazila moharam joudi

Ph.D., Department of Economic Sciences, Tabriz University, Tabriz, Iran

https://doi.org/10.22034/jifb.2023.184060

Abstract

According to the role that banks play in monetary policy, payment system, lessening the transaction costs, and controlling risks, it is important to study their performance and efficiency. Ownership is one of the factors that affects bank performance and efficiency. In addition to ownership, banks’ decisions on diversification affect their performance. In order to investigate the effects of bank ownership and scope economies of diversification, this study aims to estimate the linear and non-linear cost functions for selected banks of Iran during 2005 and 2021 and extract quasi scope economies of diversification by introducing a new method. Subsequently, using censored regression pattern (Tobit method), the effects of government ownership and quasi economies of diversification on banks’ risk return are investigated. The results indicate that there is always a positive and significant relationship between quasi economies of diversification and bank return. However, the effects of quasi economies of diversification on bank risk depends on the estimated cost function. In addition, government ownership always has a positive relationship with bank return but a negative relationship with bank risk.

Keywords

Quasi scope economies of diversification

Government ownership

Bank return

Bank risk

Tobit regression