Financial Sanctions and Iranian Banks’ Performance

In this study, we use Stochastic Frontier analysis approach to estimate cost efficiency, economies of scale, and technological progress among Iranian banks from 1999 to 2012. The results show that there is a marked difference in cost efficiency before and after the recent financial sanctions against Iranian banking industry. Moreover, the results indicate that specialized government-owned banks are less efficient than commercial government owned banks and non-government owned banks after the imposed financial sanctions. Furthermore, we could not find a logical relationship between cost efficiency and Iranian banks’ size. Cost reductions attributed to technological progress and economies of scale were greater prior to recent financial sanctions.