Investigating the convergence of banks' performance in the provinces: Nahar and Inder approach

Document Type : Scientific paper

Authors

1 Assistant Professor, Department of Economics, Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran

2 PhD Student, Department of Economics, Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran

3 Associate Professor at IAU

Abstract

A critical concern within the country's economic sectors pertains to the accessibility and cost-effectiveness of financing. Given the limitations of the capital market, financial enterprises rely extensively on the banking system for funding. In this context, the principal objective of this investigation is to scrutinize the convergence of banking performance across provinces. To this end, the facilities-to-deposits ratio has been employed to indicate banking performance. This ratio delineates the level of banking activity in fund intermediation, offering insights into resource management and allocation strategies concerning funds garnered from deposit sources for facility disbursement.The estimation outcomes utilizing the Nahar and Inder methodology from 2010 to 2020 reveal that, in 17 provinces, the banking performance index has demonstrated convergence toward the average facilities-to-deposits ratio (indicative of bank performance) observed across all provinces. However, Golestan and Qom provinces exhibit statistically significant t-statistics within this subset. Furthermore, the average performance of banks in 14 provinces has shown a divergence over time from the average facilities-to-deposits ratio of the provinces. Within this subset, Khorasan Razavi, Mazandaran, Khuzestan, East Azerbaijan, Ardabil, Sistan and Baluchestan, Ilam, and South Khorasan provinces exhibit statistically significant statistics. The discernible divergence in the performance of the nation's banks implies an escalating economic disparity among provinces, engendering heightened social and economic challenges and elevating the nation's susceptibility to external economic perturbations.

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Main Subjects

References

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Macroeconomics Research Letter
Volume 18, Issue 37
December 2023
Pages 63-91

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History

  • Receive Date: 06 May 2023
  • Revise Date: 12 July 2023
  • Accept Date: 17 September 2023

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