Identifying internal bank factors that are effective in recovering and restoring the financial health of selected private banks in the Islamic Republic of Iran

NOBAKHT, Javad; Haji, Gholamali; Memarnejad, Abbass; Sarlak, Ahmad

doi:10.22034/jifb.2023.185599

Identifying internal bank factors that are effective in recovering and restoring the financial health of selected private banks in the Islamic Republic of Iran

Document Type : Original Article

Authors

javad NOBAKHT ¹

gholamali haji ²

abbass memarnejad ³

ahmad sarlak ²

¹ -Head of planning and Strategic policy making of Shahr Bank

² Assistant Professor, Department of Economics, Islamic Azad University, Arak Branch

³ Islamic Azad University, Research Sciences Unit, Tehran

https://doi.org/10.22034/jifb.2023.185599

Abstract

The health of the banking system is extremely important for maintaining the stability of a society's economy, the monetary system, the interests of depositors, and public trust in the entire banking network. In addition, since a healthy and stable banking system can better resist shocks and play a stronger role in the stability of the financial system, it is necessary to identify effective variables and components and determine how they affect the recovery and restoration of the financial health of banks. Several factors affect the financial health of banks. Some of these factors are internal and under the control of the bank management, and based on their specific impact on the health of the bank, they can be considered positive or negative. With respect to this fact, in this study, the internal bank factors affecting the recovery and restoration of the financial health of some selected private banks in the Islamic Republic of Iran during the period of 2011-2021 were investigated using the panel data method and fixed effects. The results indicated that corporate governance, liquidity, age of the bank, and business model have a significant positive effect on the banking health index. On the other hand, bank size, financial leverage, interest-free assets, and financial risk have a significant negative effect on the banking health index.

Keywords

Financial Soundness

Internal Bank Factors

Economic Stability

Panel Data