Effect of Accounting Financial Ratios on the Capital Adequacy Ratio of the Banking System in Iran

Document Type : Original Article

Authors

1 Assistant Professor Auditing Group, Khatam University, Tehran

2 PhD Student of Accounting, Miyandoab Branch, Jameh Elmi Karbordi University, Miyandoab

3 MSc. Student of Accounting, Babol Branch, Islamic Azad University, Babol

Abstract

Having adequate capital and sufficient conditions for maintaining the health of the banking system and each of the banks and credit institutions to ensure the stability and sustainability of their activities must have an appropriate ratio between capital and risk in their assets maintain. The main function of this ratio, Protection of banks against unexpected losses of depositors and creditors is supported as well. Previous studies on the relationship between financial and capital adequacy ratios show different results. The main objective of this study is to investigate the relationship between financial performance and capital adequacy ratio in the banking system in IRAN. In this regard, data from three banking groups in the interval 1385-1390 using combined analysis evaluated the data and findings show a positive and significant relationship between the size of banks (both public and private trade group) with a capital adequacy ratio and negative relationship financial leverage capital adequacy ratio is significant. The results indicate that the relationship positive and significant return on assets in private and state-owned commercial banks in the negative, return on equity also positive and significant relationship between state-owned commercial banks and private banks with significant negative adequacy ratio capital. Other f obtained according to the statistics suggest there is no link between the financial accounting ratios as control variables with capital adequacy ratio at 95% of banks is Article 44 that requires attention to capital adequacy ratio to more than more necessary.

Keywords

Journal of Iranian Accounting Review
Volume 2, Issue 5 - Serial Number 5
February 2015
Pages 71-90

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