The Effects of Size and Revenue Diversification on Systemic Risk for Listed Banks in TSE

Document Type : applied


1 PhD Candidate, Finance, University of Tehran, Iran

2 MSc. Student, Financial Management, Ershad Damavand Higher Education Institute,Tehran, Iran


This study aims to examine the relationship between size, revenue diversity, and their interactive effects on systemic risk in private banking. The systemic risk can be measured bases on the Marginal Expected Shortfall (MES). The MES is the average return on bank stocks on days when the return in the banking industry falls below the value at risk (VaR). The analysis of combined data from eight banks listed on the Tehran Stock Exchange during the period 1999-2012 is used to estimate the regression equation. The results reveal that the bank's revenue diversification measured by the non-interest income (NII) has a reverse impact on the systemic risk. In other words, banks with a higher share of interest income in their revenue portfolio show higher systemic risk and they are more risky for the financial system if a crisis occurs. Furthermore, larger banks will have a higher impact of revenue diversity on reduced systematic risks. In fact, such banks will benefit much more from revenue diversification, and any increase in the NII can lead to a significant reduction in the systemic risk. The results indicate that it is difficult to completely accept the size effect on the systemic risks for the banks under study.
JEL: G20، G32
How to cite this paper: Hosseini, S. F., & Mostafavi, S. F. (2016). The Effects of Size and Revenue Diversification on Systemic Risk for Listed Banks in TSE. Quarterly Journal of Risk Modeling and Financial Engineering, 1(1), 20–36. (In Persian)


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