Off-balance Sheet Activities and Commercial Bank's Performance

The purpose of this paper is to analyze the effect of off-balance sheet activities on bank's risk, financial leverage, liquidity and profitability. Thus, a sample of 10 listed banks on Tehran stock exchange from 1388 to 1394 is considered. A panel data regression is used to test the relationship between off-balance sheet activities and commercial bank's risk, liquidity, financial leverage and profitability. Results show that the influence of off-balance sheet activities on bank's leverage and profitability is more than the influence of off-balance sheet activities on bank's risk and liquidity. Increasing amount of letters of credit in contrast to guarantees, decrease profitability without affecting other aspects of bank's performance. However managed funds in one hand increase profitability, and in the other hand increase financial leverage and this can increase bank's credit risk and put banks thorough some troubles meeting their obligations.