Volume 20, Issue 2 (6-2025)                   J. Mon. Ec. 2025, 20(2): 195-213 | Back to browse issues page


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shahchera M. Relationship between Risk Shifting Behavior and Moral Hazard in Iranian Banking System. J. Mon. Ec. 2025; 20 (2) :195-213
URL: http://jme.mbri.ac.ir/article-1-700-en.html
Abstract:   (199 Views)
The concept of moral hazard has a relation with risk shifting and asset portfolio. The banking background focuses on sources and types of risk shifting. However, moral hazard problem has provided a brief analysis of the incentive of risk shifting. The present study aims to figure out the model for Iranian banking system during 2000-2024 in order to determine the dominant risk shifting behavior. Risk shifting can cause conflicts between shareholders, depositors and creditors. Risk shifting can also be related to the risk taking behavior in banking systems. Accepting risk by one party can lead to risk transfers to other parties. Therefore, the present study aims to figure out whether the risk changes are related to capital ratio and other structures of balance sheet in banking system, using the deposit and non-depository debt ratio in order to reach the risk transfer rates to depositors and other parties.
The results showed that the type of risk shifting is deposit side in Iranian banking system and shareholders tend to shift risks to depositors. Return on equity seems to be the suitable variable increasing the moral hazard behavior and risk shifting. Thus, profitable banks have powerful signals for risk transfer. However, large banks supported by the Central Bank and Government show more risk shifting behaviors, the incentives of which can be detected in the banking system and decreased by regulation and supervision.
 
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Type of Study: Original Research - Case Study | Subject: Monetary Economics
Received: 2 Jun 2025 | Accepted: 16 Sep 2025 | Published: 5 Oct 2025

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