This study examines the contribution of financial institutions listed on the Tehran Stock Exchange (TSE) to systemic risk and investigates the impact of behavioral factors on that risk. Given the increasing volatility and structural changes in Iran’s capital market, understanding how investor behavior influences financial stability has become increasingly important. While previous studies have largely focused on structural determinants of systemic risk, the role of behavioral variables has received less attention.

Systemic risk is measured using the ΔCoVaR approach. The study evaluates the effects of three behavioral factors—investor sentiment, herding behavior, and loss aversion—while controlling for beta, financial leverage, return on assets (ROA), and liquidity. The sample consists of 30 financial institutions listed on the TSE during the period from April 2016 to March 2022, based on monthly observations. The research model is estimated using panel data regression with random effects.

The findings indicate that behavioral factors have a significant negative effect on systemic risk, suggesting that these variables contribute to reducing the vulnerability of the financial system. In contrast, financial leverage and liquidity are found to have positive and significant effects on systemic risk, implying that higher leverage and liquidity increase systemic exposure. The results further show that beta and ROA do not significantly influence systemic risk.

The study provides evidence that behavioral factors play a role in shaping systemic risk within Iran’s financial sector. Incorporating behavioral considerations into regulatory frameworks and decision-making processes may improve risk management practices and support policies aimed at strengthening stability and enhancing resilience.