An Analytical Investigation of Factors Affecting Persistent Profitability of Banks Listed on the Tehran Stock Exchange

Abstract

The main objective of the present study is to investigate analytically factors affecting the persistence of profitability of banks listed on the Tehran Stock Exchange. In the present study, persistence of profitability is considered as the dependent variable and variables of market power, loss reserve ratio of past due loans and credit, bank size, capital adequacy ratio, the bank age, the number of bank branches, and the number of bank human resources were considered as independent variables. The population consisted of all banks listed on the Tehran Stock Exchange during 2005 to 2014. The sample size consisted of 21 banks. In the present study, panel data with fixed effects were used. The data was analyzed using multivariate regression at the significance level 95%. The results indicated that market power, the size of banks, and capital adequacy ratio have direct (positive) effects and the loss reserve ratio of past due loans and credit has reverse (negative) effects on the persistence of profitability of banks. In addition, these results indicated that the lack of significant effects of the age of banks, number of branches, and the number of human resources in banks on persistence of profitability of banks.