The Effect of Intra-Organizational Factors on the Relationship between Corporate Governance and Profitability of the Listed Banks in Iran's Stock Exchange, in Alignment with Realization of the Resistive Economy Objectives

Varedi, Shayesteh; Tajermashaee, Mersedeh

doi:10.22034/oajre.2022.168633

The Effect of Intra-Organizational Factors on the Relationship between Corporate Governance and Profitability of the Listed Banks in Iran's Stock Exchange, in Alignment with Realization of the Resistive Economy Objectives

Document Type : Original Article

Authors

Shayesteh Varedi ¹

Mersedeh Tajermashaee ²

¹ Assistant professor, Department of Economics, Qaemshahr Branch, Islamic Azad University, Qaemshahr, Iran

² Master of Public Administration, Qaemshahr Branch, Islamic Azad University, Qaemshahr, Iran

10.22034/oajre.2022.168633

Abstract

This study investigated the effect of intra-organizational factors on the relationship of the corporate governance system with profitability of the listed banks on the stock exchange in the Islamic Republic of Iran in the period 2011-2020, using fixed effects method for a panel (mixed) data set. At first, the research model was examined without the intra-organizational factors. The results of the estimation showed that among the variables associated with profitability, exchange rate had a negative and significant effect on profitability at the 95 percent interval. Other variables were found to have a positive and significant effect on the bank profitability. Next, the intra-organizational factors were introduced into the model. The empirical evidence obtained from the test of the hypotheses indicated that corporate governance, inflation, economic growth, bank size, capital adequacy, and financial leverage had, at the 95 percent confidence interval, a significant effect on the bank profitability. In contrast, a negative and significant relationship was found between exchange rate and financial risk, on the one side, and the bank profitability, on the other. In addition, examining the effect of intra-organizational factors on the relationship between corporate governance and profitability, it was found that the intra-organizational variables strengthened the relationship between corporate governance and profitability by 0.0174 units.

Keywords

intra-organizational factors

Corporate Governance

Profitability

Panel data

Fixed effects model