Examining the Impact of Banking Activity Expansion on Electronic Banking Risk

Abstract

With the expansion of banking activities, the stock returns of bank shareholders are also affected. As fluctuations in bank stock returns increase over the long term, the cash flows of banks are influenced, which may lead to an increase in the growth rate of banks' economic value added. Given the diversification of income sources, the expansion of banking activities, and the level of investment in various economic sectors, the liquidity entering the market increases, ultimately contributing to a rise in the inflation rate. The proportion of independent board members can be considered a factor influencing the establishment of a balance between income diversification and banking activity expansion. The objective of this study is to examine the impact of banking activity expansion on electronic banking risk. This research is a library-based and analytical-causal study, utilizing panel data analysis. The financial data of 10 banks listed on the Tehran Stock Exchange were analyzed over the period from 2016 to 2021. The research sample consists of 60 bank-year observations. The findings indicate that income diversification influences bank risk. Additionally, based on the analysis conducted regarding the confirmation of the second research hypothesis, it was concluded that the expansion of banking activities affects bank risk. Furthermore, the results regarding the confirmation of the third research hypothesis suggest that income diversification impacts bank returns.