The Impacts of Capital Structure on Bank Performance A Case of Iraqi Private Banks
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Published:
Jun 20, 2019
Keywords:
Asset Growth, Bank, Bank Performance, Capital Structure, Private Banks Asset Growth, Bank, Bank Performance, Capital Structure, Private Banks
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Abstract
Purpose: This study studies the effect of capital structure on the performance of some Iraqi private banks. Six banks based in Iraq namely: Babylon Bank, Investment Bank, Credit Bank, Commercial Bank, Sharq Al-Awsat Bank, and Baghdad Bank were selected for the present study over the period 2005 to 2015. Methodology: Annual reports of these banks were studied and relevant ratios were calculated. The variables that were identified as independent for capital structure were total debt to capital, bank size and asset growth, while return on assets and return on equity were considered to be dependent variables for bank performance. The panel Least Square model has been used to examine the impact of capital structure on bank performance. Findings: Outcomes indicate that none of the independent variables has a significant impact on return on assets (ROA), while total debt to capital (TDC) has a positive impact on return on equity (ROE). Reduction: Depending on this result, Iraqi banks should keep sufficient amount of capital to avoid any financial risks and increase the probability of survival.
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How to Cite
Ibrahim, S. S. (2019) “The Impacts of Capital Structure on Bank Performance: A Case of Iraqi Private Banks”, Koya University Journal of Humanities and Social Sciences, 2(1), pp. 118-123. doi: 10.14500/kujhss.v2n1y2019.pp118-123.
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References
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Muzaffar, M., Ali, A. and Rasheed, Y. (2013). Impact of Capital Structure on Banking Performance (A Case Study of Pakistan). Interdisciplinary Journal Of Contemporary Research In Business, 4(10): 393-403.
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Oyedokun, G. E., Olatuji, K. A. and Sanyaolu, W. A. (2018). Capital Structure and Firm Financial Performance. Accounting & Taxation Review, 2(1): 56-71.
Pei, Y., Huang, T., & You, J. (2017). Nonparametric fixed effects model for panel data with locally stationary regressors. Journal of Econometrics.202 (2), 286-305.
Pinto, P. and Quadras, J.M. (2016). Impact of Capital Structure on Financial Performance of Banks. International Journal of Indian Management and Strategy, 21(3): 54-59.
Pinto, P., Hawaldar, I. T., Quadras, J. M. and Joseph, R. (2017). Capital Structure and Financial Performance of Banks. International Journal of Applied Business and Economic Research, 15(23) (Part 2): 303-312.
Rahman, A., Sarker, S.I., and Uddin, j. (2019). The Impact of Capital Structure -on the Profitability of Publicly Traded Manufacturing Firms in Bangladesh. Applied Economics and Finance, 32(6): 1-5.
Salawu, R.O., and Awolowo, O.(2009). The effect of capital structure on profitability: an empirical analysis of listed firms in Nigeria. The International Journal of Business and Finance Research, 3(2): 121-129.
Tanni, K. (2013). Capital structure effects on banking performance: a case study of Jordan. International Journal Of Economics, Finance And Management Science, 1(5): 227-233.
Vatavu, S. (2015). The impact of capital structure on financial performance in Romanian listed companied. Procedia Economics And Finance, 32(2015): 1314-1322.
Voung, N.B., Vu, T.T.Q., and Mitra, P.(2017). Impact of Capital Structure on Firm's Financial Performance: Evidence from United Kingdom. Journal of Finance & Economics Research, 2(1): 16-29. DOI: 10.20547/jfer1702102
Zafar, M. R., Zeeshan, F. and Ahmed, R.(2016). Impact of capital structure on banking profitability. International Journal of Scenitific And Research Publications, 6(3): 186-193.
Zaroki, S. and Rouhi, L. (2015). The impact of capital structure on banks performance a case study of Iran. Journal of Applied Environmental and Biological Science, 5(8s): 112-119.
Adesina, J. B., Nwidobie, B.M. and Adesina, O.O. (2015). Capital Structure and Financial Performance in Nigeria. International Journal of Business and Social Research, 5(2): 21-31
Akeem, L.B., Tere E.K., Kiyanjui, M.W. and Kayode, A.M. (2014). Effects of capital structure on firm’s performance: empirical study of manufacturing companies in Nigeria. Journal of Finance and Investment Analysis, 3(4): 39-57.
Anafo, A.S., Amponteng, E. and Yin, L.(2015). The Impact of Capital Structure on Profitability of Banks Listed on the Ghana Stock Exchange. Research Journal of Finance and Accounting, 6(16): 26-34.
Anarfo, E. B. (2015). Capital structure and bank performance- evidence from Sub-Sahara Africa. European Journal of Accounting Auditing And Finance Research, 3(3): 1-20. Annual reports available at: http://www.isc.gov.iq/en/node/1225 [Accessed on 25 of March 2018].
Arteaga-Molina, L. A., & Rodriguez-Poo, J. M. (2017). Empirical likelihood based inference for fixed effects varying coefficient panel data models. Journal of Statistical Planning and Inference. 196, 144-162.
Berger, A.N. and Bowuman, Ch.H.S (2013). How does capital affect bank performance during financial crisis? Journal of Financial Economics, 109: 146-176.
Chen, J., Yue, R., & Wu, J. (2018). Hausman-type tests for individual and time effects in the panel regression model with incomplete data. Journal of the Korean Statistical Society. Retrieved from: https://www.sciencedirect.com/science/article/pii/S1226319218300218
Cizek, P., & Lei, J. (2017). Identification and estimation of nonseparable single-index models in panel data with correlated random effects. Journal of Econometrics. 203(1), 113-128.
Das, C.P., and Swain, R.K.(2018). INFLUENCE OF CAPIT AL STRUCTURE ON FINANCIAL PERFORMANCE. Parikalpana - KIIT Journal of Management, 14(I): 161-170.
Gohar, M., Ur Reehman, W. and Al Jinnah, M. (2016). Impact of Capital Structure on Banks Performance: Empirical Evidence from Pakistan. Journal of Economics and Sustainable Development, 7(1): 32-38.
Goyal, A.M.(2013). Impact of Capital Structure on Performance of Listed Public Sector Banks in India. International Journal of Business and Management Invention, 2(10): 35-43.
Hahn, J., Ham, J. C., & Moon, H. R. (2011). The Hausman test and weak instruments. Journal of Econometrics, 160(2), 289-299.
Hashim, S. and Hassan, H. H. (2017). The Impact of Capital Structure on Financial Performance of Malaysian Public Listed Construction Firms. International Journal of Advanced Research and Publications (IJARP), 1(3): 195-206.
Ibrahim, S.S.( 2017). The impacts of liquidity on profitability in the banking sector of Iraq: A case of Iraqi commercial banks. Journal of Finance and Banking Studies, 6(1), 113-121.
Jaworski, J., and Czerwonka, L.(2018). IMPACT OF CAPITAL STRUCTURE ON ENTERPRISE’S PROFITABILITY: EVIDENCE FROM WARSAW STOCK EXCHANGE. 9th Economics & Finance Conference, London ISBN 978-80-87927-53-3 , IISES: 90-100. DOI: 10.20472/EFC.2018.009.007
Maduane, R. and Tsaurai, K. (2016). The link between capital structure and banking sector performance in an emerging economy. Risk Governance & Control: Financial Markets & Institutions, 6 (4): 291-297.
Mehar, M.R. (2018). Analysis of the Capital Structure and Banks Performance: Evidence from Pakistan. Journal of Business & Financial Affairs, 7(2): 1-5. DOI: 10.4172/2167-0234.1000343
Meles, A., Porzio, C., Sampagnaro, G. and Verdoliva, V. (2016). The impacts of intellectual capital efficiency on commercial banks performance: evidence from the US. Journal of Multinational Financial Management, 361: 64-74.
Mouna, A., Jianmu, Y., Havidz, Sh. A. H., and Ali, H.(2017). The impact of capital structure on Firms performance in Morocco. International Journal of Application or Innovation in Engineering & Management, 6(10): 11-16.
Muhammad, H., Shah, B. and Islam, Z. (2014). The Impact of Capital Structure on Firm Performance: Evidence from Pakistan. Journal of Industrial Distribution & Business, 5(2):13-20.
Musah, A. (2017). The Impact of Capital Structure on Profitability of Commercial Banks in Ghana. Asian Journal of Economic Modelling, 6(1): 21-36.
Muzaffar, M., Ali, A. and Rasheed, Y. (2013). Impact of Capital Structure on Banking Performance (A Case Study of Pakistan). Interdisciplinary Journal Of Contemporary Research In Business, 4(10): 393-403.
Nikoo, S.F. (2015). Impact of Capital Structure on Banking Performance: Evidence from Tehran Stock Exchange. International Research Journal of Applied and Basic Sciences, 9(6): 923-927.
Oyedokun, G. E., Olatuji, K. A. and Sanyaolu, W. A. (2018). Capital Structure and Firm Financial Performance. Accounting & Taxation Review, 2(1): 56-71.
Pei, Y., Huang, T., & You, J. (2017). Nonparametric fixed effects model for panel data with locally stationary regressors. Journal of Econometrics.202 (2), 286-305.
Pinto, P. and Quadras, J.M. (2016). Impact of Capital Structure on Financial Performance of Banks. International Journal of Indian Management and Strategy, 21(3): 54-59.
Pinto, P., Hawaldar, I. T., Quadras, J. M. and Joseph, R. (2017). Capital Structure and Financial Performance of Banks. International Journal of Applied Business and Economic Research, 15(23) (Part 2): 303-312.
Rahman, A., Sarker, S.I., and Uddin, j. (2019). The Impact of Capital Structure -on the Profitability of Publicly Traded Manufacturing Firms in Bangladesh. Applied Economics and Finance, 32(6): 1-5.
Salawu, R.O., and Awolowo, O.(2009). The effect of capital structure on profitability: an empirical analysis of listed firms in Nigeria. The International Journal of Business and Finance Research, 3(2): 121-129.
Tanni, K. (2013). Capital structure effects on banking performance: a case study of Jordan. International Journal Of Economics, Finance And Management Science, 1(5): 227-233.
Vatavu, S. (2015). The impact of capital structure on financial performance in Romanian listed companied. Procedia Economics And Finance, 32(2015): 1314-1322.
Voung, N.B., Vu, T.T.Q., and Mitra, P.(2017). Impact of Capital Structure on Firm's Financial Performance: Evidence from United Kingdom. Journal of Finance & Economics Research, 2(1): 16-29. DOI: 10.20547/jfer1702102
Zafar, M. R., Zeeshan, F. and Ahmed, R.(2016). Impact of capital structure on banking profitability. International Journal of Scenitific And Research Publications, 6(3): 186-193.
Zaroki, S. and Rouhi, L. (2015). The impact of capital structure on banks performance a case study of Iran. Journal of Applied Environmental and Biological Science, 5(8s): 112-119.