The Effectiveness of Financing Structure on Insolvency Risk in Iranian Banking System

Banks are the main components of the financial sector in the economy and doing valuable activity in either side of their balance sheets. This diverse nature of operations that carried out by the banks subjected them to various risks in their daily operations. In this study regarding importance of the issue, It is tried to discuss the relation between financing structure of banks in Iranian banking system and its impact on the Insolvency risk. In addition, the impact of macroeconomic variables on the Insolvency risk is evaluated too. We used 16 banks of Iranian banking system from 2001 to 2011 to estimate the selective model with macroeconomic variables and balance sheet data. It is understood that there is a significant relationship between independent variables and Insolvency risk over a long term and short term period, by using a four step econometric pattern and liner GMM (generalized method of moments) forecasting model.