Investment Efficiency Analysis of the Iraqi Banking Sector: An Analytical Study for the Period 2004–2022
DOI:
https://doi.org/10.57125/FEL.2025.03.25.05Keywords:
Investment efficiency, Iraqi banking sector, private banks, information asymmetry, over-investmentAbstract
This study aims to analyses the investment efficiency of the banking sector in Iraq for the period 2004-2022, using the model, where all data for Iraqi banks were obtained from the Iraq Stock Exchange, and according to the regular sample method, the size of the studied sample was (39) private banks with (428) observations, and as a result, the unbalanced panel data was used according to the ordinary least squares (OLS) method to estimate the relationship between revenue growth and banking investment growth. The private banking sector in Iraq had excessive investment at the beginning of the study period due to the economic and political conditions that Iraq went through before 2004. After that year, banks began to increase their investment activity significantly. As a result of the improvement of conditions, these banks began to achieve a relative balance between their investments and their achieved returns. The study also proved that banks with huge assets are more efficient than small banks due to the accumulation of investment management experiences and skills. There are also fundamental reasons that can limit the achievement of efficiency within institutions, which is the information asymmetry that occurs between managers and shareholders, which can exacerbate the agency problem and push managers to enter into losing projects in pursuit of their interests, in addition to the information asymmetry that occurs between investors and managers, where managers may hide important information about the company's overall performance and try to mislead external financing providers to raise funds. These results can help managers in the studied Iraqi banks determine the extent of investment efficiency their banks have reached to address shortcomings or weaknesses and reduce financial losses that may occur in the future.
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