The Effect of Degree of Competition and Capital Requirements on Iranian Banks' Risk-Taking

Document Type : Research Paper


1 Associate Professor of Economics, University of Tehran

2 Professor Of Economics, Tehran University

3 Assistant Professor Of Economics, Tehran University

4 Ph.D. Student of Economics, University of Tehran


Using Blundell and Bond generalized method of moments (GMM) system estimator, this study investigates the effect of degree of competition and capital requirements on the risk-taking of the Iranian banking system over the period 1385-1394. The results suggest that the first lag of degree of competition in the deposit market has a significant and positive effect on banks' risk-taking. But the increase in the degree of competition in the loan market, leads to banks' risk-taking reduction. Regarding the effect of capital to asset ratio on bank`s risk-taking, the results show a significant and negative effect on banks' risk-taking. Moreover, the results suggest that the increase in capital per unit of assets leads to reduction in banks' profitability. A decrease in banks' profitability due to increase in capital to asset ratio, leads to capital requirements inefficiency for mitigating banks' risk-taking.
JEL Classification: G11, G21, G32, E44, C23


Main Subjects

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