Abstract
This study investigates if the choice of capital structure of Iraqi banks could be interpreting through factors which have been studied by prior studies, which represented by determinants of capital structure choice (i.e., bank size, bank profitability, bank growth, tangibility, bank age). Using dynamic panel GMM for the period 2005 to 2019, this study maintains the explore on the determinants of capital structure of Iraq banks "developing country" that has circumstances likely to be quite different from those in developed and other major developing countries, particularly in terms of it deteriorating economic environment. The findings indicate that the bank size, bank profitability, bank age have a dominant role in explaining the variation in the long-term debt ratios of Iraqi banks. Meanwhile, only bank size, bank profitability, bank growth, bank age has a leading role in interpreting the variation of short-term debt ratios in the Iraqi banks. The current study has initiated some basis to discover the capital structure determinants of Iraqi banks upon which a more detailed evaluation could be based. Moreover, the experimental results can help Iraqi banks directors to choose the optimum structure of capital.
Highlights
The capital structure considers as an essential pillar for a company in the business environment nowadays
This study aims to determine whether Iraqi listed-banks’ capital structure determinants follow capital structure theory that applicate in western economies
The regression results from models 1 and 2 of Table 3 show that several bank-specific factors to show statistically significant and stable results throughout regressions, such as assets tangibility, bank size, profitability, and bank growth are significantly related to long-term debt ratio (LEVL) in in Iraqi banks
Summary
The capital structure considers as an essential pillar for a company in the business environment nowadays. A bank with an unsuitable structure may face difficulties in surviving in a competitive market. Increasing corporate taxes, developing financial intermediation, reduction of uncertainty, and reduction of governmental borrowing, led companies' willingness to issue debt when constructing capital structure (Graham, Leary, & Roberts, 2015); Economics, University of Kerbala, Iraq. Which increase the possible finance choices for the company. Rising challenge of the best capital structure for the bank. The modern theorem of capital structure initiates with an irrelevancy theorem of (Modigliani & Miller, 1958) and its followed modifications. After Modigliani and Miller’s contributions, theoretical arguments add more theories, the most famous being the pecking order theory, the trade-off, and the agency theorem
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