The Effect of Information and Communication Technology on Profitability of Banks in Iran (during the period 2005-2017)

The development of information and communication technology (ICT) applications in the monetary and banking markets of developed countries has led the banking industry of other countries to use the capabilities of e-banking and innovation to improve efficiency. Therefore, considering the importance of information and communication technology and its potential impacts on the banking industry, the main goal of the study is to investigate the effects of ICT on the profitability of Iranian banks. In this regard, the financial information of 13 banks of the country during the period 2005 to 2017 has been collected. In this paper, due to the existence of self-correlation and variance disparity of the studied model, the FGLS Panel econometric method has been used. The results of this study show that with 99% confidence, research hypotheses can be accepted that the Information and Communication Technology Index has a positive and significant effect on the return on assets (ROA) of Iranian banks. In addition, the results in relation to other control variables have shown that the size of the bank, asset quality and cost ratio have reduced profitability but non-interest income are significantly positively associated with profitabilitis. Among the macroeconomic indicators, GDP per capita and inflation have a significant negative and positive effect on banks' profitability, respectively.