The Relationship between Credit and Liquidity Risks and the Prediction Ability of Profitability of Accepted Banks in Tehran Stock Exchange

This study investigates the relationship between credit and liquidity risks and the prediction ability of profitability of accepted banks in Tehran Stock Exchange (TSE). Data are collected from all banks and financial and credit institutions listed in TSE during the years 1390 to 1394. The sample includes 11 banks and financial and credit institutions, and credit and liquidity risks are independent variables where the ability to predict short-term and long-term benefits are dependent variables. Three control variables, that is profit per share, financial leverage and asset growth, have also been used. Results show that there is no significant relationship between credit risk and the ability to predict long-term and short-term profitability of accepted banks in TSE. Moreover, there is a significant relationship between liquidity risk and the ability to predict long-term and short-term profitability of accepted banks in TSE.