Management ability, political influence, and financial pressure on deferred claims of Iranian banks

• Published date: 01 February 2022
• Author: Habib Piri,Mahdi Salehi,Mahmoud Mousavi Shiri
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2274

ACADEMIC PAPER

Management ability, political influence, and financial pressure

on deferred claims of Iranian banks

Habib Piri | Mahdi Salehi | Mahmoud Mousavi Shiri

Department of Accounting, Zahedan Branch,

Islamic Azad University, Zahedan, Iran

Correspondence

Mahdi Salehi, Department of Accounting,

Zahedan Branch, Islamic Azad University,

Zahedan, Iran.

Email: mahdi_salehi54@yahoo.com

The present study aims to assess the relationship between management ability, polit-

ical influence, and financial pressure, as well as deferred claims, of the listed banks on

the Tehran Stock Exchange. Data of the banks on the Tehran Stock Exchange have

been assessed from 2009 to 2017, to assess the effect of management ability, politi-

cal influence, and financial pressure on bank deferred claims. For evaluating the

deferred claims, three indices of doubtful accounts, bank delays, and loan-to-deposit

ratios were used. The findings of the study show that there is no relationship

between managerial ability and bank delay indices. Furthermore, the results also

reveal there is a relationship between political influences and state-owned owner-

ship, as well as doubtful accounts, and also the relationship between state-owned

ownership and the loan-to-deposit ratio is positive and significant.

1|INTRODUCTION

According to the previous regulations of the recent section of Article

34 for the amendment of the approved registration law 1973, in case

the bank is obliged to issue a writ of execution for collaterals to col-

lect the claims, after the expiration of due legal deadlines and non-

fulfillment of related obligations from the debtor or borrower, the

entire executed land registry number will be transferred to the bank

for the total related claim. In other words, the value of those proper-

ties, for which the writ of execution has been approved, has not been

effective in executive transfer to the bank.

Since the abovesaid rules are contrary to Sharia according to the

opinion of distinguished jurists of the Guarding Council and following

Article 781 of Civil Law “in case the indebted property is sold at price

higher than the mortgagee, the extra owner property and if, on the

contrary, it is the result of a lower price, the mortgagee should pay

back the damage to the mortgagor”. Some changes were made to the

previous law and after the provision of Article 34 for the amendment

of the approved registration law 2007 and the executive regulations,

the contents of the official document in force effective as of 2008,

under the title of possession of the entire land registry number, got

canceled by the honorable president of the Judiciary, and according to

this law, in case the debtor does not take action within 10 days from

the date of notification for fulfilling the related obligations, at the

request of the bank, the notary office, in addition to assessing the

executed land registry within 2 months from the date of finality of

assessment, holds an auction to collect the bank claims to the amount

equal to the legal request and pay back the extra amount to the

mortgagor.

Deferred claims have some pervasive effects such that they

deprive the banks of obtaining facility profit, delay penalty, and

deferred claims reserves. This means that, in case the granted facilities

are delayed, in addition to being affected by the repayment of

incurred costs, the bank also loses the profit of such facilities, which is

one of the income resources. In case of not collecting a portion of

facilities, the bank will also lose this type of income, either. In some

cases, the sum of such penalties is even equal or more than the facili-

ties, and mostly its rate is lower than the expected earnings rate.

Thus, given the significance of exact evaluation of capital cost for

banks and also the necessity of enhancing the performance in this

major economic firm, the realization of contributing factors to

deferred claims is significant both for managers, investors, and credi-

tors, as well as for the government, so considering the different

aspects, the present study aims to assess the effects of management

ability, political risk, and financial crises on bank deferred claims. Fur-

thermore, according to international sanctions against Iran and Iranian

and banking systems, the current paper captured a very interesting

topic in Iran (Salehi, Karimzadeh, & Paydarmanesh, 2017). In the fol-

lowing, first, we discuss the theoretical principles related to variables,

and then assess how such a relationship between the dependent

Received: 23 June 2020 Revised: 8 July 2020 Accepted: 10 July 2020

DOI: 10.1002/pa.2274

J Public Affairs. 2022;22:e2274. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons, Ltd 1of10

https://doi.org/10.1002/pa.2274