The effect of economic misery index on banks' financial performance

Today, banks, as the most important element of the money market, play a very important role in the country's economy, and considering the importance of bank profitability in different economic conditions and its impact on the economy and society, it is necessary for managers to have the necessary knowledge about the role of this bank. Factors influencing the profitability of this important part of the economy. The present study investigates the effect of the Misery index on the financial performance of banks. The statistical population in this research is all the banks admitted to the Tehran Stock Exchange in the period of 2014-2022. To analyze the research data, multivariable regression models and panel data method with fixed effects have been used. The dependent variable in this research is the financial performance of banks and the independent variable is the indicators of economic distress. Also, the secondary variables used in the present study are bank size, financial leverage, market value to book value and operating income growth. The economic misery index variable has a negative coefficient and a significance level of less than 5%, therefore, the research hypothesis is accepted at the confidence level of 95%. The adjusted coefficient of determination of the model also shows that 88% of the changes are explained by the variables entered in the model. The results of this research showed that the economic distress index has a negative effect on the financial performance of banks. In other words, in the era when the country has a higher economic misery index, the financial performance of banks is affected and decreases. Therefore, controlling inflation and unemployment due to the effect of these variables on most economic sectors should be considered one of the most important goals of the statesmen.