Banking Concentration and Its Impact on The Performance and Financial Stability of Commercial Banks
(An analytical study of Iraqi commercial banks for the period 2013-2022)
Doctoral thesis submitted to the Console of Administration and Economics / University of Karbala. as a part of the requirements for obtaining the degree of Doctor of Philosophy in Financial and Banking Sciences.
BY
Jihad Faisal Jihad
Supervised By
Ass. Prof. Dr. Ameer Ali Khalil Al-Moussawi
Abstract
The current study aimed to measure the impact of banking concentration on the financial performance and financial stability of Iraqi commercial banks for the period (2013-2022). The independent variable, banking concentration, was measured by two main indicators, the first is the (CR5) index, which indicates the five largest banks in terms of total assets, and the second is (HHI), which refers to the Herfindahl-Hirschman index.
As for the dependent variables, financial performance and financial stability, we relied on four main indicators that are compatible with the current study. The first is the return on assets (ROA) indicator, and the second is the cash liquidity ratio. The third indicator is the ratio of total loans to total deposits, and finally the indicator of the ratio of ownership rights to total deposits. The second dependent variable is measuring the financial stability of commercial banks through the Altman Z-Score, which is one of the most famous measures for measuring financial failure or financial distress to which banks are exposed. The problem of the study dealt with the most important economic sectors in Iraq, which is the banking sector, specifically commercial banks. It focused on explaining the extent of the impact of banking concentration on the performance of commercial banks and financial stability. In order to know the extent of this impact, a main question was asked, which is (Does banking concentration affect performance? And the financial stability of the commercial banks (sample of the study?) A set of sub-questions branched out from it, namely: Does banking concentration affect the financial performance of Iraqi commercial banks? The other question is: Does banking concentration contribute to achieving financial stability for the Iraqi banking sector?
In this study, the researcher used the analytical and descriptive approach to reach the goal of the study. With regard to the theoretical aspect, many Arab and foreign sources related to the variables of the study were consulted. As for the practical framework, the data was analyzed using the statistical program SPSS.V25, and correlations were analyzed using Pearson correlation coefficient, and the effect between the study variables was analyzed using simple linear regression, in order to test the hypotheses of the current study.
Results of the study showed that there is a statistically significant correlation and impact between banking concentration with its indicators (CR5) and (HHI) and each of the financial performance indicators (liquidity index, funds employment index, capital adequacy index). It was also shown that there is a statistically significant correlation and impact between banking concentration (CR5) and the financial stability index for commercial banks (Al-Mansour Bank, International Development Bank, National Bank of Iraq, Regional Commercial Bank), and the existence of a statistically significant correlation and impact between banking concentration (HHI). )) and the financial stability index for commercial banks (Al-Mansour Bank, International Development Bank, National Bank of Iraq, North Bank, Commercial Region Bank) , The current study recommended the need for Iraqi commercial banks to develop appropriate marketing mechanisms for their services, in order to increase their assets and provide better services, which will reflect positively on the banking sector. The managements of commercial banks with a small size of assets should follow the banking merger approach voluntarily in order to confront Challenges, especially in light of the current competitive environment, in order to increase its capital base and increase market share, as well as improve capital adequacy.
