M.A. Thesis:

Liquidity risk, capital ratios and bank efficiency

Banks, as the main active institutions in financial and monetary markets, play an important role in the growth and progress of nations. In this regard and to stop wasting funds, evaluation of their efficiency is very important. Due to financial panic issue and as in a bank-based financial system, stability of active banks affect on prevailing condition in financial markets, especially financial stability, the banking stability can be considered as the leading financial stability in the economy. Because of this importance, national and international regulatory bodies imposed limitations and tried to prevent the risk of bank portfolio. This study sought to evaluate the relationship between the efficiency and stability of Iran’s banking. In this regard, 11 state and private Iranian banks were studied during 2011-2016. Bank efficiency have been studied using data envelopment analysis and developing intermediate approaches. Also for the stability of the banking capital, adequacy ratio and liquidity and credit risk indicators was used. At last, to investigate the effect of stability on efficiency, the models was estimated using generalized least squares. The results indicated that there is a negative correlation between capital adequacy ratio as one of the main financial stability and efficiency measures in banking systems. The results showed that there is a meaningful relationship between capital ratio and risk index. The results showed a significant relationship between liquidity risk indicators and efficiency does not exist. Overall, results showed, improvement in the stability of the banking system led to a decrease in the efficiency of banks in Iran banking system. This, reflects the poor performance of banks in the portfolio choosing that can reduce risk and improve performance efficiency, simultaneously.

Keywords: Bank, Efficiency, Financial stability, Capital Adequeacy Ratio, Data Envelopment Analysis (DEA).