THE RELATIONSHIP BETWEEN FINANCIAL FAILURE PREDICTION AND LIQUIDITY: EVIDENCE FROM BANKS OPERATING IN THE FINANCIAL MARKET

Abstract

The present study seeks to examine the relationship between liquidity, treated as the independent variable, and financial failure, regarded as the dependent variable. A sample comprising five banks listed on the Iraq Stock Exchange has been selected for this investigation. These banks include the Iraqi Commercial Bank, North Bank for Finance, Union Bank of Iraq, Gulf Commercial Bank, and Middle East Bank. The variables are evaluated using financial indicators, and the research stems from a problem centred on the impact of liquidity utilisation on financial failure. Additionally, the study aims to investigate the nature of the association between the identified variables. To conduct the research methodically, four hypotheses have been developed regarding the effect of liquidity on financial failure. These hypotheses are subsequently examined using statistical techniques and the SPSS statistical software. The findings confirm the reliability of the asset ratio, as it demonstrates a stable and consistent trend among the selected banks throughout the period from 2011 to 2020. Furthermore, the outcomes indicate successful avoidance of financial failure in asset management practices. Nevertheless, deposit levels exhibit variation across the sampled banks. Accordingly, the study emphasises the necessity of ongoing evaluation of financial indicators within these banks. Such analysis is crucial for gaining a thorough understanding of a bank’s standing relative to other markets, identifying areas of strength for enhancement, and recognising weaknesses that require corrective measures.