Volume 20, Issue 4 (12-2025)
J. Mon. Ec. 2025, 20(4): 501-525 |
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akbari roshan M, molababaean bishe A, mojab R. The Impact of Large Loan Credit Concentration Risk on Default Rates: Empirical Evidence from Banks Listed on Tehran Stock Exchange. J. Mon. Ec. 2025; 20 (4) :501-525
URL: http://jme.mbri.ac.ir/article-1-730-en.html
URL: http://jme.mbri.ac.ir/article-1-730-en.html
Abstract: (263 Views)
Bank facilities can be categorized into large-scale and non-large-scale facilities based on their value and in compliance with banking regulations. Given the significant share of large-scale facilities in the country's total credit portfolio, the exposure to a limited number of borrowers—primarily major corporations—and their subsequent direct and indirect effects on the banking system and the economy, this paper investigates the credit concentration risk associated with large-scale facilities.
Using the Herfindahl-Hirschman Index (HHI), the degree of name concentration in the allocation of large-scale facilities among beneficiaries was measured, and its impact on the default rate of these facilities was estimated using a Generalized Method of Moments (GMM) model for 15 banks listed on the Tehran Stock Exchange during the period 2022–2024. Additionally, the share of large-scale facilities in the total loans granted by each bank (as another concentration measure) was included in the model, along with the loans-to-deposits ratio and the capital adequacy ratio as control variables.
The model results indicate stickiness and a statistically significant impact of the lagged default rate of large-scale facilities. It was observed that name concentration in the allocation of large-scale facilities has a negative effect on the default rate of these facilities. However, the share of large-scale facilities in total loans—as an alternative concentration measure—did not exhibit a statistically significant effect on their default rate. Furthermore, the loans-to-deposits ratio, which serves as an indicator of banks’ liquidity and resource management performance, had a significant negative effect. Additionally, an improvement in the capital adequacy ratio led to a statistically significant reduction in the default rate of large-scale facilities.
Using the Herfindahl-Hirschman Index (HHI), the degree of name concentration in the allocation of large-scale facilities among beneficiaries was measured, and its impact on the default rate of these facilities was estimated using a Generalized Method of Moments (GMM) model for 15 banks listed on the Tehran Stock Exchange during the period 2022–2024. Additionally, the share of large-scale facilities in the total loans granted by each bank (as another concentration measure) was included in the model, along with the loans-to-deposits ratio and the capital adequacy ratio as control variables.
The model results indicate stickiness and a statistically significant impact of the lagged default rate of large-scale facilities. It was observed that name concentration in the allocation of large-scale facilities has a negative effect on the default rate of these facilities. However, the share of large-scale facilities in total loans—as an alternative concentration measure—did not exhibit a statistically significant effect on their default rate. Furthermore, the loans-to-deposits ratio, which serves as an indicator of banks’ liquidity and resource management performance, had a significant negative effect. Additionally, an improvement in the capital adequacy ratio led to a statistically significant reduction in the default rate of large-scale facilities.
Keywords: Risk management, Large corporate loans, Credit risk, Name concentration risk, Loan default rate
Type of Study: Original Research - Case Study |
Subject:
Monetary Economics
Received: 11 Aug 2025 | Accepted: 18 Nov 2025 | Published: 23 Nov 2025
Received: 11 Aug 2025 | Accepted: 18 Nov 2025 | Published: 23 Nov 2025
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