The Effect of Financial Liberalization on Performance of Commercial Banks in Iran

This study investigates the effects of financial liberalization on the performance of commercial banks in Iran using time series data from 2001: 1 to 2014: 4. For empirical estimates, this study is used Johansen-Juselius cointegration and vector error correction model. Results of the Johansen co-integration method shows that in the long run variables the loans of the Bank, liquidity, economic growth, financial liberalization, and trade liberalization has a positive effect on the performance of commercial banks and variables such as the ratio of receivables to total loans, as banks and commercial banks are adversely affecting the rate of inflation. Error correction coefficient also shows that in each period 0.28 percent of imbalance performance commercial banks, modified and is moving towards its long-term trend.