The effect of liquidity risk on the financial stability and profitability of Iran’s private banking industry

Considering the relationship between the performance of the banking system and the macroeconomic sectors of the country, any instability and crisis in it can cause fluctuations and disturbances in macroeconomic variables, especially production. Therefore, it is important to emphasize the role of financial mediation, check and ensure the stability and health of the banking system. The financial stability of banks is one of the most important and influential factors in increasing or decreasing the liquidity criterion of banks’ shares. If the financial stability of banks is stable on average over a five-year period, we can expect an increase in the growth rate of assets and finally an increase in the liquidity criteria of banks. Banks are seeking to increase their productivity according to their profitability in the short and long term. The main purpose of this research is the effect of liquidity risk on the financial stability and profitability of Iran’s private banking industry. The present research is descriptive-correlation type. The data required for this research, including some accounting items, have been collected from the banks’ financial statements that are available on their electronic portals. The statistical population of this research consists of 11 private banks out of a total of 22 private banks. The method of testing the hypotheses in the present study is the panel data method, which was done using Eviews 10 software. The results show that liquidity risk has a significant effect on the risk of non-performing loans and net interest margin.