Asymmetrical Information of Loan: A Case of Iranian Banking System

Non-performing loans have become the most important challenge in the Iranian banking system in recent years، especially in regard with the bank-base financial market of Iran''s economy. Theoretical literatures points to two factors involved in this issue: internal and external. The main purpose of this study is to investigate the bank internal factors in generating non-performing loans in Iranian banks. Thus، identifying the ways such factors affect non-performing loans can be helpful for the enhancement of banks operations. In this paper; the bank size، credit risk، efficiency، structure، and ownership of banks are employed as influential indices which affect non-performing loans. The method which is used is a Panel Data regression analysis during the period of 2007- 2011. The results indicate that the bank size and credit risk have a positive significant relationship with non-performing loans and bank efficiency، but bank structure has a negative relationship with non-performing loans. The other findings of this study demonstrate the double effect of bank ownership on creating of non-performing loans in the Iranian banking system.