CAPITAL STRUCTURE, FINANCIAL FLEXIBILITY, AND BANK EFFICIENCY: A PANEL STUDY OF IRAQI COMMERCIAL BANKS

Abstract

The current study presents the relation between financial efficiency and financial flexibility in the Iraqi banking sectors with special focus on Iraqi banks that are mentioned in the financial market. These banks are: These are five commercial banks operating in the private sector over the period 2011-2020. To calculate this mature relation, three methods are used to analyze longitudinal regression which includes ordinary small squares. Fixed Effects, and Random Effects. Moreover, , Financial efficiency was measured using specific financial indicators related to income and returns on both assets and equity. As for financial flexibility, debt-to-equity and interest-to-income ratios, as well as the liquidity ratio. The result clearly depicts that Debt-to-Equity Ratio considerably and positively affects Cost-to-Income Ratio for all three methods simultaneously. Yet, Interest Coverage Ratio shows clearly and significantly negative impacts on Cost-to-Income Ratio. A statistically significant relationship has emerged showing that a higher interest coverage ratio leads to better asset-based efficiency, and that return on equity positively affects financial efficiency but negatively affects the liquidity ratio.