The Comparative Study of Non-Interest Income Effect on Risk and Profitability of the Banks with and without Financial Constraints

Today, a common problem some financial institutions face is how to provide resources and determine non-interest income, and this problem becomes more complicated when institutions faced by financial constraints. Thus, identifying the type of non-interest income effect on their profitability and risk conditions leads investors to be able to easily invest and finance for their institutions. The statistical population includes 16 banks listed on TSE during the period from 2009 to 2015. In order to increase the number amount of observations for statistical analysis, all the banks are selected as research samples. To separate the banks with financial constraints and those without financial constraints the Z score is used. To test the research hypotheses Eviews software is employed. The research method is based on the pooled data approach and the multivariate regression model, and the basis for testing hypotheses is based on the Kelag method. The results show that the non-interest income has a significant effect on risk and profitability. Another result of the study is that the ability of non-interest income effect on risk reduction and increase in profitability for the banks with financial constraints is higher than that for the banks with no financial constraints.