The impact of bank income diversity on risk efficiency and cost efficiency

Document Type : Original Article

Authors
Amir Ali Farhang 1
vahid nikpey pesyan 2
Reza Neysari ali abad 3
1 Assistant Professor, Department of Economics, Payame Noor University(PNU), Tehran, Iran
2 PhD student in Economics, Department of Economics and Management, Urmia University
3 Master of Economics, Department of Economics, Payam Noor University, Tehran, Iran
10.30495/jik.2025.23822
Abstract
This study examines the relationship between income diversity and credit risk efficiency and cost efficiency of 16 public and private banks during the period of 2011-2019. In this study, the Herfindahl-Hershman index is used as a measure of income diversification, the non-parametric CCR input-oriented method and Lingo software is used to calculate the credit risk efficiency, and the SFA parametric method and Frontier software are used to calculate the interest cost efficiency. We have searched. To study the relationship between income diversification and efficiency, a panel data model has been used using the panel data method and Eviews software, and the effect of income diversification on credit risk efficiency and cost efficiency is the main issue of this research, which is Two separate models are estimated. The obtained results show that the increase in income diversification causes the reduction of credit risk efficiency and cost efficiency. In addition, the effect of the ratio of shareholders' equity to total assets has a negative and significant effect on credit risk efficiency, and bank size has a positive and significant effect on both efficiencies in both models. The ratio of loans to total assets, deferred claims to facilities, the ratio of fixed assets to total assets, and the ratio of operating income to total assets of the bank are the control variables of the research, the effect of which is measured on both efficiencies.
Keywords
Income diversification
credit risk efficiency
cost efficiency
CCR
SFA
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