The Effect of Liquidity Risk and Credit Risk on Financial Stability Banking industry in Iran; Multiple regression approach

The impact of different risks is of great importance in banking industry on financial sustainability, given its functional entity. Given the lack of consensus on the relationship between financial risks in banks, in particular, in credit risk and liquidity in banks, this research investigates the relationship of these two types of risks and their impacts on financial sustainability in banking industry in Iran during 2005-2014 with panel data method. In this regard, in order to investigate the impact of liquidity and credit risks on financial sustainability, Quintile regression method. The results indicate the negative and significant impact of these two types of risks on financial sustainability in most reviewed decimals. This means that with an increase in financial sustainability, the impact of these two types of risks is reduced. In other words, those banks placed in the higher decimals of sustainability distribution are affected less by credit and liquidity risks.