Risk Dynamics in Iraqi Banking Sector: Role of Bank Capital and Efficiency

Authors

  • Bha Aldan Abdulsattar Faraj University of Al Maarif, Ramadi, Iraq https://orcid.org/0000-0002-6776-9995
  • Muhammad Hassan Danish University of Management and Technology Lahore
  • Esha Nisar University of Management and Technology Lahore-Pakistan

Keywords:

capital, technical efficiency, allocative efficiency, cost efficiency, risk, iraq

Abstract

The succession of financial crises has made it necessary for economists and policymakers to have a comprehensive understanding of financial systems and efficiency to reduce risks. Therefore, this study is designed to analyze the relationship between bank capital, efficiency, and risk in Iraqi banking sector by using the data from 2011-2022 for 20 commercial banks in the country. Efficiency is measured by three factors, including allocating efficiency (AE), technical efficiency (TE) and cost efficiency (CE). Results of the panel GMM indicate that bank capital is negatively associated with one risk measure (Zscore) while it is positively related to other measures of risk (SDROA and SDROE). Moreover, AE, TE and CE are also significant determinants of risk factors in banking. TE and CE are negatively related to solvency risk (ZSCORE) and SDROA, while positively associated with SDROE. But AE is only negatively related to Z-score and positively related to SDROA and SDROE. This study contributes valuable insights into the performance, efficiency, and stability of the Iraqi banking sector, providing policymakers, regulators, and industry stakeholders with essential information for decision-making and strategic planning.

Author Biographies

Bha Aldan Abdulsattar Faraj, University of Al Maarif, Ramadi, Iraq

Dr. BHA Aldan Abdul Sattar is an Assistant Professor in the Department of Economics at Al-Maarif University College, Anbar – Iraq. His academic and research interests focus on financial economics and econometrics, with an emphasis on empirical modeling, risk analysis, and the application of quantitative methods in economic research. His work explores critical topics such as risk premium estimation, financial market efficiency, and the impact of financial policies in emerging economies. He is particularly interested in leveraging econometric techniques to address real-world economic issues and to contribute toward informed decision-making in financial and public policy.

Muhammad Hassan Danish, University of Management and Technology Lahore

Dr. Muhammad Hassan Danish is an Assistant Professor of Economics at University of Management and Technology, Lahore-Pakistan. His research expertise’s comprises in the diversified field of social sciences with the mainly focus on primary data and panel data research. His work includes economics of happiness, public policy analysis, banking sector development and households’ economics. Moreover, Dr Hassan streamlined the area of research with sustainable development goals of UNDP. He explores the current and more relevant issues in the research area to provide a way forward in achieving SDGs. He has excellent command of econometric software’s including Stata, SPSS, Eviews and Smart PLS for data analysis especially the primary or survey data.

Esha Nisar, University of Management and Technology Lahore-Pakistan

Esha Nisar is a research scholar in Masters’ Degree at School of Commerce and Accountancy, University of Management and Technology, Lahore. She is also serving as a Financial Analyst at PACRA (The Pakistan Credit Rating Agency). She posses strong command on panel data analysis and writing manuscripts in the field of Accounting and Finance.

Published

2025-10-10

Issue

Vol. 19 No. 3 (2025): Fall

Section

Articles

License

Copyright (c) 2025 FWU Journal of Social Sciences