چکیده:
The banks’ response to their changes in leverage ratios is examined and evaluated in this paper. This reaction can be interpreted as if the coefficient of total debts to equity (lev1) and total assets to equity (lev2) are positive as anticipated in the banking network of Iran. The paper uses data from 31 Iranian banks’ annual databases during the course of 2006-13 in order to estimate an empirical panel data model of banks’ balance sheet adjustment. We identify the leverage ratio degree to show that both equity and liabilities tend to adjust to move leverage positively without considering the state of the Iranian economy. On the other hand, the index of leverage coefficient conditioned by the state of the economy is negative which replicates that banks tend to experience a negative impact of leverage on the return to equity as a result of cost push due to higher ratio of assets to equity in the bust and inappropriate return on investment. Furthermore, the non-performing loans ratio coefficient is negative and significant which proves that one percent increase in the nonperforming loans has led to a less than one percent decrease in the return on equity ratio as expected, but the total loans to total deposits ratio depicts a negative-significant coefficient which denotes the higher non-performing loans have caused that loans ratio increase will not necessarily give rise to higher returns for the banks. Besides, the leverage ratio (lev2) is positive as expected and banks gain higher returns through higher leverage. However, the leverage measure’s coefficient conditioned by the state of the economy (dummy) is negatively significant owing to cost push from lower return on investment and higher ratio of assets to equity in the bust
خلاصه ماشینی:
"Commencing on the general model and considering the selected variables, the empirical model is optimally selected as random effect based on the Hausman test used in this study which is presented by equation (2): LROEit = C +β1LNPLTTLit + β2LNPLTTAit + β3LNPLTTEit + β4LNPTEAit + β5LROAit + β6LTLTTDit + β7LLATTDit + β8LLEV2it + β9GDP_Git + β10LLEV2D_GDP_Git (2) where the key determinants of return on equity as profitability or earning indicator is defined as the logarithm of return on equity (LROE), asset quality measures are denoted by LNPLTTL, LNPLTTA and LNPLTTE respectively representing logarithm of nonperforming loans to total loans ratio, logarithm of nonperforming loans to total assets proportion and logarithm of nonperforming loan to equity ratio, LNPTEA which indicates the logarithm of net profit to earning assets ratio signifying profit margine (PMAR) as another earning indicator in line with LROA defined as logarithm of return on assets, LTLTTD is defined as the logarithm of the total loans to total deposits ratio signifying the management indicator, LLATTD is determined by logarithm of liquid assets to total deposits ratio representing as the liquidity measure of the FSIs, LLEV2 is defined as the logarithm of leverage ratio (total assets to equity), GDP_G is representing gross domestic products growth of the Iranian economy, and LLEV2D_GDP_G denotes a dummy which shows the cross multiplication of the leverage ratio and GDP growth to depict the simultaneous impact of leverage during boom and bust in zero (bust) and one (boom) format to show that the leverage ratio is analyzed conditioned by the economic cycle."