Factors Affecting the Return of Commercial Banks in Iran

Returns along with risk are the most important investment criteria. Asset of enterprises are the main sources of value creating for stockholders. Investors in stock market, consider some factors in asset pricing which affect their returns. This paper investigates fundamental factors affecting bank’s stock returns. Return on assets ratio has emphasized in this paper and our search is going to study banking profitability in their stock market return through extention of ROA ration. In this paper using panel data, the relationship between returns on assets and other fundamental factors on stock returns were examined and finally through Bayesian vector autoregressive relationship between bank’s stock returns and their fundamental variable were studied. The results show that stock returns of Iranian banks has a significant positive relationship with its one period lag, net income to total operating revenues, ratio of total operating revenues to net interest income and significant negative effects with net interest income to interest income and bank size.