Objective: Iranian banks are exposed to extensive systematic risk due to financial constraints and fluctuations in economic policies. This research aimed to identify factors affecting systematic risk in the Iranian banking system to provide an accurate model for managing and reducing these risks.
Methodology: This applied study employs a descriptive-analytical approach, examining panel data of banks listed on the Tehran Stock Exchange over a seven-year period (2019–2024) consisting of 168 firm-year observations. Data were collected from financial databases and analyzed using panel data models and the Estimated Generalized Least Squares (EGLS) estimator.
Findings: The results showed that macro, structural, and market factors have a significant effect on systematic risk; in such a way that interest rates have the greatest effect with a coefficient of 0.215 and an increasing (aggravating) direction on risk. After that, exchange rates with a coefficient of 0.076 and bank size with a coefficient of 0.109 also have a positive and significant effect on increasing systematic risk. In contrast, return on assets as a reducing (stabilizing) factor with a negative coefficient of 0.043 and market liquidity with a negative coefficient of 0.020 play an important role in reducing risk. Also, structural complexity and digital transformation were identified as new increasing factors. These findings show that systematic risk is a function of the complex interaction of internal and environmental variables; therefore, adopting coordinated macroprudential policies to control interest rate and exchange rate fluctuations, and improving internal efficiency (increasing ROA) is necessary .