The Impact of Capital Structure and Banking Risks on the Profitability of Banks

(An applied Study of a Sample of Private Iraqi Banks listed on the Iraqi Stock Exchange for the period (2010-2021)

A thesis submitted to

The Council of Administration and Economics College – University of Karbala In partial Fulfillment of the requirements for the degree Master of Finance and Banking Science

 By

Ali Abdul Karim Dagher

Supervisor by

Prof. Dr.Hamid Mohsin Jadah

Abstract                                                                                                                   

  The study aims to shed light on creating a better picture of the capital structure and its relationship to the performance of banks in developing economies such as Iraq. This study is unique by determining the optimal structure for Iraqi banks and arriving at scientific evidence on measuring the relationship between capital structure and banking risks and their impact on profitability in commercial banks, that is, exploring the effect of capital measured by the long-term financing ratio on the profitability of the commercial banks that is measured. The rate of return on assets and the rate of return on equity, and the study was applied to a sample of ten Iraqi banks listed on the Iraqi Stock Exchange for the period from (2010-2021). The conditions for selecting the study sample were applied to them. Three models were used to analyze the relationship between the variables of the study, as it aims The first model aims to measure the effect of capital structure on banking risks, the second model aims to measure the effect of capital structure on profitability, and the third model aims to measure the effect of banking risks on banks’ profitability. The results of the study indicated that there is a statistically significant negative correlation between capital structure and banking profitability. There is also a statistically significant positive correlation between banking profitability and banking risks. The results also showed that there is a statistically significant negative correlation for banking risks in profitability, and the results demonstrated the existence of a significant relationship. Statistical significance between capital structure and banking risks.

     In light of the results, the study recommended the necessity of requiring banks to maintain the capital adequacy ratio and adopt modern methods and technologies to keep pace with developments and enhance their competitive position.

Keywords: Capital Structure, Banking Risks, Banking Profitability

The Impact of Capital Structure and Banking Risks on the Profitability of Banks

(An applied Study of a Sample of Private Iraqi Banks listed on the Iraqi Stock Exchange for the period (2010-2021)

A thesis submitted to

The Council of Administration and Economics College – University of Karbala In partial Fulfillment of the requirements for the degree Master of Finance and Banking Science

 By

Ali Abdul Karim Dagher

Supervisor by

Prof. Dr.Hamid Mohsin Jadah

Abstract                                                                                                                   

  The study aims to shed light on creating a better picture of the capital structure and its relationship to the performance of banks in developing economies such as Iraq. This study is unique by determining the optimal structure for Iraqi banks and arriving at scientific evidence on measuring the relationship between capital structure and banking risks and their impact on profitability in commercial banks, that is, exploring the effect of capital measured by the long-term financing ratio on the profitability of the commercial banks that is measured. The rate of return on assets and the rate of return on equity, and the study was applied to a sample of ten Iraqi banks listed on the Iraqi Stock Exchange for the period from (2010-2021). The conditions for selecting the study sample were applied to them. Three models were used to analyze the relationship between the variables of the study, as it aims The first model aims to measure the effect of capital structure on banking risks, the second model aims to measure the effect of capital structure on profitability, and the third model aims to measure the effect of banking risks on banks’ profitability. The results of the study indicated that there is a statistically significant negative correlation between capital structure and banking profitability. There is also a statistically significant positive correlation between banking profitability and banking risks. The results also showed that there is a statistically significant negative correlation for banking risks in profitability, and the results demonstrated the existence of a significant relationship. Statistical significance between capital structure and banking risks.

     In light of the results, the study recommended the necessity of requiring banks to maintain the capital adequacy ratio and adopt modern methods and technologies to keep pace with developments and enhance their competitive position.

Keywords: Capital Structure, Banking Risks, Banking Profitability