Management Science Letters

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1 Management Scence Letters 3 (2013) Contents lsts avalable at GrowngScence Management Scence Letters homepage: Investgatng on effects of dfferent grantng loans on bank deposts Seyed Kazem Ebrahm a and Hassan Nazar b* a Assstant Professor, Department of Accountng, Semnan Unversty, Semnan, Iran b Master student,dosn Manangement,Semnan Branch, Islamc Azad Unversty,Semnan,Iran C H R O N I C L E A B S T R A C T Artcle hstory: Receved September 18, 2012 Receved n revsed format 21 December 2012 Accepted 21 December 2012 Avalable onlne December Keywords: Bankng ndustry Bank depost Loan Ths paper nvestgates the relatonshp between dfferent grantng loans and bank deposts n some governmental banks n provnce of Semnan, Iran. For the proposed study of ths paper, equpment of resources ncludes cash account, zero-nterest account, short term nvestment and long term nvestment and these are consdered as dependent varables. There are also seven types of grantng loans devoted to customers, whch are partnershp loans, zero-nterest loans, cvc partcpaton, contract quantty loans, future contract loans, rent-purchase loans and nstallment sales loans. The study consders the fnancal nformaton of 171 governmental banks located n provnce of Semnan, Iran over the perod The results of our study ndcate that fve varables mantan postve mpact on dependent varable. The hghest mpact belongs to Partnershp loans (0.34), followed by Sales loans (0.24), contract quantty loans (0.21) and Zero-nterest loans (0.16) and Future contract loans (0.14) come n the last poston. The study also uses Freedman test to rank dependent factors and the results ndcate that shortterm nvestment s number one prorty followed by long term nvestment and the other two optons ncludng zero-nterest and cash accounts are n lower prorty Growng Scence Ltd. All rghts reserved. 1. Introducton One of the most mportant ssues n bankng ndustry s to prepare approprate packages to ncrease ther bank deposts. In fact, one mportant crteron to measure the relatve effcency of bakng ndustry s to fnd out how much deposts n dfferent forms exst n ther system. There are lterally varous works devoted on the relatonshp between bank depost and loans. Depken II et al. (2010) for nstance performed and emprcal nvestgaton and reported that Sub-S depost (loan) rates are equal to or lower (hgher) than smlar C corporaton bank rates and therefore there was a lttle evdence of any tax benefts accrung to Sub-S bank clents. Bushman and Wllams (2012) estmated two methods of the forward-lookng orentaton reflected n dscretonary loan provsonng practces wthn a country. They reported that proposals to change loan loss accountng embed substantal rsks of unntended consequences, as gans from reducng pro-cyclcalty could be swamped by losses n *Correspondng author. Tel: E-mal addresses: hn98_nazar@yahoo.com (H. Nazar) 2013 Growng Scence Ltd. All rghts reserved. do: /j.msl

2 506 transparency, whch dampen market dscplne and ncrease the scope for less prudent rsk-takng by banks. De Graeve et al. (2007) nvestgated the pass-through from market nterest rates to retal bank nterest rates. They suggested a heterogeneous method and mplemented t to the Belgan bankng market. They reported a sgnfcant amount of the heterogenety n bank prcng polces could be explaned by the bank lendng channel and the relatve market power hypothess. They also explaned that the long-term pass-through was bascally less than one-for-one, rejectng the completeness hypothess. Ioanndou and Penas (2010) nvestgated the mpact of depost nsurance on the rsk-takng attdude of banks n the context of a quas-natural experment usng detaled credt regstry nformaton n a case study from Bolva. They compared the rsk-takng behavor of banks before and after the ntroducton of some depost system and reported that n the post-depost nsurance perod, banks were more lkely to ntate rsker loans. They also reported some evdence that the ncrease n rsktakng was due to the decrease n market dscplne from large depostors. Uchda and Nakagawa (2007) studed whether Japanese banks had been followng herd behavor n the domestc loan market from 1975 through 2000 and reported that a total of some 5 trllon yen of loan ncrease by cty banks durng the perod of could be attrbuted to rratonal herd behavor. Hülsewg et al. (2007) addressed the credt channel n Germany by usng aggregate nformaton and presented a stylzed framwork of the bankng frm n whch banks decded on ther loan supply n the lght of expectatons about the future course of monetary polcy. Affnto and Taglaferr (2010) nvestgated the ex ante determnants of bank loan securtzaton based on varous econometrc technques on Italan ndvdual bank data over the perod They reported that bank loan securtzaton was a composte decson and banks, whch were less captalzed, less proftable, less lqud and burdened wth troubled loans were more lkely to perform securtzaton, for a larger amount and earler. 2. The proposed study The proposed study of ths paper nvestgates the relatonshp between dfferent grantng loans and bank deposts n some governmental banks n provnce of Semnan, Iran. For the proposed study of ths paper, equpment of resources ncludes cash account, zero-nterest account, short term nvestment and long term nvestment and these are consdered as dependent varables. There are also seven types of grantng loans devoted to customers, whch are partnershp loans, zero-nterest loans, cvc partcpaton, contract quantty loans, future contract loans, rent-purchase loans and nstallment sales loans. The man hypothess of ths paper s as follows, 1. What are dfferent knds of loans and facltes nfluencng deposts n varous governmental banks n provnce of Semnan, Iran. 2. What are the rankngs of dfferent nfluencng facltes on banks deposts n governmental banks n provnce of Semnan, Iran Research hypotheses Man hypothess: Grantng loans attract deposts n governmental banks n provnce of Semnan, Iran. The man hypothess of ths survey s stated n the followng sub-hypotheses, 1. Grantng partnershp loans attract deposts n governmental banks n provnce of Semnan, Iran. 2. Grantng cvc partcpaton loans attract deposts n governmental banks n provnce of Semnan, Iran. 3. Grantng nstallment Sales loans attract deposts n governmental banks n provnce of Semnan, Iran. 4. Grantng contract quantty loans attract deposts n governmental banks n provnce of Semnan, Iran. 5. Grantng future contract loans attract deposts n governmental banks n provnce of Semnan, Iran.

3 H. Nazar and S.M. Ibrahm / Management Scence Letters 3 (2013) Grantng rent-purchase loans attract deposts n governmental banks n provnce of Semnan, Iran. 7. Grantng zero-nterest loans attract deposts n governmental banks n provnce of Semnan, Iran. The proposed study of ths paper consders the fnancal nformaton of 171 governmental banks located n provnce of Semnan, Iran over the perod Table 1 shows detals of dfferent knds of fnancal resources, Table 1 Descrptons of varous varables Varable types Ttle Scale Dependent Cashng account (M8) Ordnal Equpment of resources Dependent Zero-nterest account (M9) Ordnal Dependent Short term nvestment (M10) Ordnal Dependent Long term nvestment (M11) Ordnal Independent Partnershp loans (M2) Ordnal Independent Zero-nterest loans (M1) Ordnal Facltes Independent Cvc partcpaton (M4) Ordnal Independent Contract quantty loans (M5) Ordnal Independent Future contract loans (M6) Ordnal Independent Rent-purchase loans (M7) Ordnal Independent Installment sales loans (M3) Ordnal The proposed study of ths paper uses regresson analyss based on ordnary least square technque to analyze the relatonshp between equpment of resources and facltes. Table 2 demonstrates detals of some basc statstcs assocated wth ndependent and dependent varables. Table 2 Statstcal observatons Equpment of resources Var. Ttle mn max mean Std. dev. Z Sg. M8 Cashng account M9 Zero-nterest account M10 Short term nvestment M11 Long term nvestment M2 Partnershp loans M1 Zero-nterest loans M4 Cvc partcpaton Facltes M5 Contract quantty loans M6 Future contract loans M7 Rent-purchase loans M3 Installment sales loans The frst step s to use Kolmogorev-smrnov (KS) test (Boes et al., 1974) to verfy the normalty of the data. Based on the results of KS, all Z values shown n Table 2 are statstcally sgnfcant and we can conclude that the data are not normally dstrbuted. Therefore, we need to take the necessary actons to normalze the data for the purpose of regresson analyss and we have used logarthm of the data to normalze the data and use them for the purpose of regresson analyss. The proposed model of ths paper uses the followng regresson 7 (1) Y = β M, = 1 where, 1,,7 regresson analyss and Y s the dependent varable. 3. The results M = L are ndependent varables defned n Table 1, β, = 1, L,7are coeffcents of We frst examne the man hypothess of the study and n our survey, two varables of cvc partcpaton and rent-purchase loans are not statstcally sgnfcant. However, other varables are statstcally meanngful and they are summarzed as follows,

4 508 Y=0.16M M M M M 3 P-value=0.000 (2) As we can observe from the results of Eq. (2), fve varables mantan postve mpact on dependent varable. The hghest mpact belongs to Partnershp loans (0.34), followed by Sales loans (0.24), contract quantty loans (0.21) and Zero-nterest loans (0.16) and Future contract loans (0.14) come n the last poston. In other word, an ncrease of one unt n any components of these fve varables wll ncrease depost proporton wth ther rates The frst sub hypothess: Relatonshp between bank depost and grantng partnershp loans The frst hypothess s assocated wth the relatonshp between bank depost and grantng partnershp loans. Table 3 demonstrates the results of regresson analyss. Table 3 The results of regresson analyss for the frst sub-hypothess Independent Dependent varable Regresson Statstcs Coeffcent of Correlaton Sg. Varable Partnershp loans Bank deposts Y=0.62X The second sub hypothess: Relatonshp between bank depost and cvc partcpaton loans The second hypothess s assocated wth the relatonshp between bank depost and cvc partcpaton loans. Table 4 demonstrates the results of regresson analyss. Table 4 The results of regresson analyss for the second sub-hypothess Independent Varable Dependent Regresson Statstcs Coeffcent of Correlaton Sg. varable Cvc partcpaton Bank deposts Y=0.52X The thrd sub hypothess: Relatonshp between bank depost and Installment sales loans The thrd hypothess s assocated wth the relatonshp between bank depost and Installment sales loans. Table 5 demonstrates the results of regresson analyss. Table 5 The results of regresson analyss for the thrd sub-hypothess Installment sales loans Bank deposts Y=0.53X The fourth sub hypothess: Relatonshp between bank depost and contract quantty loans The fourth hypothess s assocated wth the relatonshp between bank depost and contract quantty loans and Table 6 shows the results of regresson analyss.

5 H. Nazar and S.M. Ibrahm / Management Scence Letters 3 (2013) 509 Table 6 The results of regresson analyss for the ffth sub-hypothess Installment sales loans Bank deposts Y=0.44X The ffth sub hypothess: Relatonshp between bank depost and future contract loans The ffth hypothess s assocated wth the relatonshp between bank depost and future contract loans and Table 7 presents the results of regresson analyss. Table 7 The results of regresson analyss for the ffth sub-hypothess Future contract loans Bank deposts Y=0.26X The sxth sub hypothess: Relatonshp between bank depost and rent-purchase loans The sxth hypothess s assocated wth the relatonshp between bank depost and rent-purchase loans and Table 8 presents the results of regresson analyss. Table 8 The results of regresson analyss for the sxth sub-hypothess Rent-purchase loans Bank deposts Y=0.39X The seventh sub hypothess: Relatonshp between bank depost and zero-nterest loans The seventh hypothess s assocated wth the relatonshp between bank depost and zero-nterest loans and Table 9 presents the results of regresson analyss. Table 9 The results of regresson analyss for the sxth sub-hypothess Rent-purchase loans Bank deposts Y=0.32X Another ssue s to learn the mpact of dfferent factors and rank them usng Freedman test. In our survey, the test has yeld wth 6 degrees of freedom and Sg. = Table 10 shows detals of rankng varous factors.

6 510 Table 10 The results of Freedman test for dfferent loans Var. Zeronterest Partnershp Cvc Future Contract quantty Installment Rent-purchase partcpaton contract sales Mean Rank As we can observe from the results of Table 10, nstallment sales loans are ranked one followed by zero-nterest loans and partnershp loans. In addton, contract quantty, cvc partcpaton and rentpurchase come n the last prortes. Next, we have ranked varous forms of deposts for attractng customers based on Freedman test where the statstcs s equal to 98.2 wth three degrees of freedom and Sg. value of and Table 11 summarzes them as follows, Table 11 The summary of Freedman test on rankng varous technques of deposts Var. Cash account Zero-nterest account Short term nvestment Long term nvestment Mean Rank It s obvous from the results of Table 11 that short-term nvestment s number one prorty followed by long term nvestment and the other two optons ncludng zero-nterest and cash accounts are n lower prortes. 4. Concluson In ths paper, we have nvestgated the mpact of seven types of loans granted to varous customers n some major governmental banks n provnce of Semnan, Iran. The study has gathered the necessary nformaton and usng lnear regresson analyss found that fve varables mantan postve mpact on bank depost, sgnfcantly. The hghest mpact belongs to Partnershp loans (0.34), followed by Sales loans (0.24), contract quantty loans (0.21) and Zero-nterest loans (0.16) and Future contract loans (0.14) come n the last poston. The study has also ranked the effects of dfferent deposts and reported that short-term nvestment was number one prorty followed by long term nvestment and the other two optons ncludng zero-nterest and cash accounts were n lower prortes. References Affnto, M., & Taglaferr, E. (2010). Why do (or dd?) banks securtze ther loans? Evdence from Italy. Journal of Fnancal Stablty, 6(4), Boes, D. C., Graybll, F. A., & Mood, A. M. (1974). Introducton to the Theory of Statstcs. 3 rd ed. New York: McGraw-Hll, Bushman, R.M., & Wllams, C.D. (2012). Accountng dscreton, loan loss provsonng, and dscplne of Banks rsk-takng. Journal of Accountng and Economcs, 54(1), Depken II, C.A., Hollans, H., & Swdler, S. (2010). Do tax benefts conferred to Sub-S banks affect ther depost or loan rates? Fnance Research Letters, 7(4), De Graeve, F., De Jonghe, O., & Vander Vennet, R. (2007). Competton, transmsson and bank prcng polces: Evdence from Belgan loan and depost markets. Journal of Bankng & Fnance, 31(1), Hülsewg, O., Mayer, E., & Wollmershäuser, T. (2006). Bank loan supply and monetary polcy transmsson n Germany: An assessment based on matchng mpulse responses. Journal of Bankng & Fnance, 30(10), Ioanndou, V.P., & Penas, M.F. (2010). Depost nsurance and bank rsk-takng: Evdence from nternal loan ratngs. Journal of Fnancal Intermedaton, 19(1), Uchda, H., & Nakagawa, R. (2007). Herd behavor n the Japanese loan market: Evdence from bank panel data. Journal of Fnancal Intermedaton, 16(4),