Investigating the Impact of Business Complexities on the Risk-Taking of Iranian Banks

Askari, Zeinab; Ranjbar, Mohammad Hossein; Ahmadi, Faegh; Badiei, Hossein

doi:10.48308/jep.2025.241360.1243

Investigating the Impact of Business Complexities on the Risk-Taking of Iranian Banks

Document Type : Original Article

Authors

¹ Department of Accounting, Qeshm International Branch, Islamic Azad University, Qeshm, Iran.

² Department of Accounting, Bandar Abbas Branch, Islamic Azad University, Bandar Abbas, Iran.

³ Department of Accounting Financial Management, Qeshm Branch, Islamic Azad University, Qeshm, Iran.

⁴ Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran.

10.48308/jep.2025.241360.1243

Abstract

This study investigates how multiple facets of corporate complexity influence risk exposure in the Iranian banking sector, using a panel data sample from 21 banks spanning the years 2009 through 2022. Complexity is assessed through two key metrics: non-core assets (nonbank assets) and revenue generated from non-interest activities. Findings from the static model suggest that a greater proportion of non-core assets correlates with lower levels of bank risk. In contrast, non-interest revenue exhibited no meaningful relationship with risk. Additional tests determined that the risk mitigation observed from non-core assets does not operate via increased non-interest income, leading to a rejection of the hypothesized mediating effect. Additionally, it was discovered that bank size, which was included as a moderator, had no discernible impact on this association. In contrast, a dynamic assessment using the System GMM approach produced conflicting results. The key discovery here is proof that bank risk has inherent persistence. Once dynamic variables were properly controlled, the impact of non-core assets on risk was statistically insignificant. This finding shows that the complexity-risk link is less direct than static techniques suggest, as long-run risk features tend to outweigh the effect of specific components. The study improves understanding of the complexity-risk nexus by presenting empirical data from a rising market and emphasizes the importance of using dynamic methodological frameworks in future research.

Keywords

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