:: Volume 11, Issue 2 (Spring 2016) ::
J. Mon. Ec. 2016, 11(2): 153-171 Back to browse issues page
The Effect of Regulatory Policy on Efficiency under Prudential Framework among Listed Iranian Banks
Mohammad Valipour Pasha * 1, Jahangir Biabani 2
1- Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran
2- Payam Noor University, Tehran
Abstract:   (490 Views)

This study examines the effect of regulatory policy on efficiency under prudential framework among banks listed in the Iranian Securities and Exchange Organization over the period 2003 to 2015. Arellano-Bond estimation method has been patronized to investigate the effect of regulatory policies on efficiency. Results indicate that regulatory policy indicator indexing reserve requirement on investment deposits has had a positive relationship with the efficiency ratio, Sum of Assets Circulation Ratio (SACR), although it is not meaningful. On the other hand, the legal reserve ratio is positively and meaningfully affecting efficiency in financial institutions. Leverage ratio is negatively and meaningfully affecting the efficiency ratio (SACR) which highlights the point that as the financial institutions heighten their leverage ratio, it will lead to lower sum of asset circulation ratio as the best indicator of efficiency under activity proportions. Higher risk will lead to higher Financial Cost to Net Profit ratio (FCNP) interpreted as lower efficiency in financial institutes. Furthermore, regulatory policy denoted by the legal reserves ratio with one lag interval negatively-significantly influences the financial cost ratio.

JEL Classification: C81, E43, E65, G21, G23

Keywords: Regulatory Policy, Efficiency, Degree of Leverage Ratio, Prudential Framework
Full-Text [PDF 309 kb]   (178 Downloads)    
Type of Study: Research | Subject: Economics
Received: 2018/06/12 | Accepted: 2018/06/12 | Published: 2018/06/12

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Volume 11, Issue 2 (Spring 2016) Back to browse issues page