Journal of Iranian Economic Issues

Journal of Iranian Economic Issues

Dynamic Analysis of Factors Affecting Return on Assets and Return on Equity of Banks Listed in Iran's Capital Market Using the TVP-PVAR Model

Document Type : Scientific-research

Authors
Mohamadali Ehsani 1
Hamed Soltaninezhad 2
Mohamadghasem Akbari 3
Mehdi Gholamizare 4
1 Associate Professor, Faculty of Administrative Sciences and Economics, University of Mazandaran, Mazandaran, Iran.
2 Ph.D. Candidate, Faculty of Administrative Sciences and Economics, University of Mazandaran, Mazandaran, Iran, Researcher at the Central Bank of the Islamic Republic of Iran.
3 Associate Professor, Faculty of Mathematics and Statistics, University of Birjand, Birjand, Iran
4 Ph.D in Economic, Department of Accounting, Bardskan Branch, Islamic Azad University, Bardskan, Iran.
10.30465/ce.2025.53132.2069
Abstract
The return on assets (ROA) and return on equity (ROE) are key indicators for assessing the financial performance of banks, influenced by factors such as credit risk, macroeconomic variables, and capital structure. This study examines the factors affecting the ROA and ROE of banks listed in the Iranian capital market. To conduct this research, a Time-Varying Parameter Panel Vector Autoregression (TVP-PVAR) model and Python programming language were used over the period from 1388 to 1400 (2009–2021). Data were collected for eleven selected banks listed in the Iranian capital market. The results indicate that credit risk and asset quality are critical factors in reducing ROA and ROE. Additionally, bank size plays a significant role in better risk management and increased profitability. Inflation has a negative impact on bank returns in the short term. Economic growth increases demand for banking services, thereby enhancing bank profitability. Moreover, surges in the capital market create favorable opportunities for banks to boost profitability. Furthermore, the findings suggest that reducing sanctions and improving international relations facilitate access to external financial resources and enhance bank returns. Ultimately, this study emphasizes the importance of improving bank strategies to enhance ROA.
Keywords
Return on Assets
Return on Equity
Credit Risk
Macroeconomic Variables
TVP-PVAR Model

Subjects

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  • Receive Date 14 October 2025
  • Revise Date 16 November 2025
  • Accept Date 21 November 2025