In collaboration with Iranian Association for Energy Economics(IRAEE) and Scientific Association of Defence Economics of Iran(SADEI)

Document Type : applicative

Authors

1 Ph.D candidate of Economics , Razi University

2 Asistant Professor of Economics, University of Mazandaran

Abstract

Competition in the banking system due to the entry of new banks has increased in recent years. Therefore, banks have different policies to increase their market share. Income diversification and credit growth are the policies that may affect the banks efficiency. This study examines the effects of credit growth and income diversification on the cost  efficiency of banking system by using the banking-level data over the period of 2006-2014 and applying Tobit model.  The study findings show that the Sina Bank and Bank Meli have the highest and lowest cost efficiency, respectively. The results of Tobit's estimation show that credit growth and income diversification improve the cost efficiency of banking industry.

Keywords

محمدنژاد، نیما؛ فطرس، محمدحسن و معصومی، محمدرضا (1394)." تحلیل ارتباط بین اعتبارات بانکی و رشد اقتصادی"، دو فصلنامه اقتصاد پولی، مالی، شماره 10، 22-1.
شاهچرا، مهشید و جوزدانی، نسیم (1395)." تنوع پذیری درآمدها و سودآوری در شبکه بانکی کشور"، فصلنامه سیاست‌های مالی و اقتصادی، شماره 14، 52-33.
Abraham V. and S.K. Sasikumar (2011). Labor Cost and Export Behavior of Firms in Indian Textile and Clothing Industry. Economics, Management & Financial Markets6(1).‏
Acharya V.V., Hasan I. and A. Saunders )2006(. "Should Banks be Diversified? Evidence from Individual Bank Loan Portfolios". Journal of Business, 79 (3), pp.1355–1412.
Amador J.S., Gómez-González J.E. and A.M. Pabón (2013). "Loan Growth and Bank Risk: New Evidence". Financial Markets and Portfolio Management27(4), pp. 365-379.
Baele L., De Jonghe O. and R. Vander Vennet (2007). "Does the Stock Market Value Bank Diversification?". Journal of Banking & Finance31(7), pp. 1999-2023.
Baradwaj BG, Flaherty MV and Y. Shao (2014). "The Impact of Lending Growth on the Riskiness of Chinese Banks". Chinese Economy47(5-6), pp. 29-49.
Battese G.E. and T.J. Coelli (1995). “A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data”. Empirical economics, 20(2), 325-332.
Berger A.N. and T.H. Hannan (1998). "The Efficiency Cost of Market Power in the Banking Industry: A Test of the “quiet life” and Related hypotheses". The Review of Economics and Statistics80(3), pp. 454-465.
Chiorazzo V., Milani C. and F. Salvini )2008(. “Income Diversification and Bank Performance: Evidence from Italian Banks”. Journal of Financial Services Research, 33(3), pp.181–203.
Debreu G. (1951). “The Coefficient of Resource Utilization”. Econometrica: Journal of the Econometric Society, pp. 273-292.‏
Deng S. and E. Elyasiani (2008). “Geographic Diversification, Bank Holding Company Value, and Risk". Journal of Money, Credit and Banking, 40(6), pp. 1217–1238.
Drucker S. and M. Puri (2008). “On loan Sales, Loan Contracting and Lending Relationships”. The Review of Financial Studies, 22(7), pp.2835-2872.
Elsas R., Hackethal A. and M. Holzhäuser (2010). “The Anatomy of Bank Diversification”. Journal of Banking & Finance34(6), pp. 1274-1287.
Farrell M.J.(1957). “The Measurement of Productive Efficiency”. Journal of the Royal Statistical Society. Series A (General), 120(3), pp. 253-290.
Köhler M. (2012). “Which Banks are More Risky? The Impact of loan Growth and Business Model on Bank Risk-taking”. Discussion Papers 33/2012, Deutsche Bundesbank.
Koopmans T.C. (1951). “Activity Analysis of Production and Allocation”. Activity Analysis of Production and Allocation.‏
Lee C.C., Yang S.J. and C.H. Chang (2014). “Non-interest Income, Profitability and Risk in Banking Industry: A cross-country Analysis”. The North American Journal of Economics and Finance, No.27, pp. 48-67.
Lepetit L., Nys E., Rous P. and A. Tarazi (2008). “Bank Income Structure and Risk: an Empirical Analysis of European Banks”. Journal of Banking and Finance, 32(8), pp. 1452–1467.
Lozano-Vivas A. and F. Pasiouras (2010). “The Impact of Non-traditional Activities on the Estimation of Bank Efficiency: International Evidence”. Journal of Banking & Finance34(7), pp. 1436-1449.
 
McDonald J.F. and R.A. Moffitt (1980). “The Uses of Tobit Analysis”. The review of economics and Statistics, pp. 318-321.
Mercieca S., Schaeck K. and S. Wolfe (2007). “Small European Banks: Benefits from Diversification?” Journal of Banking and Finance, 31(7), pp. 1975–1998.
Meslier C., Tacneng R. and A. Tarazi (2014). “Is bank Income Diversification Beneficial? Evidence from an Emerging Economy”. Journal of International Financial Markets, Institutions and Money, No. 31,
pp. 97-126.
Molyneux P. and J. Yip (2013). “Income Diversification and Performance of Islamic banks”. Journal of Financial Management, Markets and Institutions1(1), pp. 47-66.
Odesanmi S. and S. Wolfe (2007). “Revenue diversification and Insolvency Risk: Evidence from banks in Emerging Economies”. Retrieved on January, No. 27.
Pandya A.M. and N.V. Rao (1998). “Diversification and firm Performance: An Empirical Evaluation”. Journal of Financial and Strategic Decisions11(2), pp. 67-81.
Sanya S. and S. Wolfe (2011). “Can banks in Emerging Economies Benefit from Revenue Diversification?”. Journal of Financial Services Research40(1-2), pp. 79-101.
Stiroh K.J. (2004). “Diversification in banking: is Non-interest Income the Answer”. Journal of Money, Credit, and Banking,36(5),pp.853–882.
Stiroh K.J. and A. Rumble )2006(. “The Dark Side of Diversification: the Case of US Financial Holding Companies”. Journal of Banking and Finance, 30(8), pp. 2131–2161.
Tabak B.M., Fazio D.M. and D.O. Cajueiro (2011). “The Effects of Loan Portfolio Concentration on Brazilian banks’ Return and Risk". Journal of Banking & Finance35(11), pp.3065-3076.
Turkmen S.Y. and I. Yigit (2012). “Diversification in Banking and its Effect on Banks’ Performance: Evidence from Turkey”. American International Journal of Contemporary Research, 2(12), pp. 111-119.
Vennet R.V. )2002(. “Cost and Profit Efficiency of Financial Conglomerates and Universal Banks in Europe”. Journal of Money, Credit and Banking, 34(1), pp. 254– 282.
Zhao H. and S. Kang (2015), Cost Efficiency of Chinese Commercial banks, International Journal of Finance and Accounting, 4(3), pp.180-186.