Studying the Role of Financial Risk Management on Return on Equity

  •  Saeed Fathi    
  •  Fatemeh Zarei    
  •  Sharif Shekarchizadeh Esfahani    


Nowadays risk has an important role in all countries, and its management is valuable for banks to the extent that
they publish their applying methods about risk management and their operations and results in a scheduled order
toward customer orientation in order to gain stockholders’ confidence. In this article, three instruments of bank
risk management are represented by means of financial ratios consisting of interest rate risk, capital risk and risk
of natural hedging. So, the basic problem in this paper is the impact of risk management on stockholders’ wealth.
Stockholders’ wealth is measured by Return on Equity (ROE). This article has three hypotheses, the major one
of which is that there is a significant correlation between risk indices and ROE. Results show that interest rate
risk and diversification risk have significant correlation with ROE, but there is no significant correlation between
credit risk and ROE.

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