The Effect of Ownership Structure on the Nonperforming Loans in Iraqi Banks

Abstract

Objective – The aim of the study is to examine the relationship between ownership structure (state ownership, foreign ownership, institutional ownership, and management ownership) and nonperforming loans in the Iraqi banking industry. Methodology – Based on quantitative research, the study adopted an archival research strategy using documents (annual reports) as a source of data. In addition, 31 banks working in Iraq were selected based on panel data with a time frame specified for 2011-2020, with 310 observations. Findings – The study found that three types of ownership foreign, institutional, and managerial, are associated with NPLs negatively, but government ownership is linked to NPLs positively because government-owned banks might have a hard time resisting government interference, which leads to higher risk-taking. Novelty – research conducted on the relationship between ownership structure and non-performing loans mainly has focused on developed nations, and there has been little research on the subject in developing countries. There is a need for research centering on developing nations since studies on this topic in developed economies do not adequately explain the relationship between ownership structure and non-performing loans in these countries. As a result, the present research focuses primarily on Iraq, where a significant credit risk characterizes the banking system compared to other Middle Eastern developing nations. Furthermore, the material on ownership structure is not found in Iraq. Type of Paper: Review JEL Classification: C21, G32, H81, Z33. Keywords: Corporate governance, Ownership structure, Non-performing loans, Iraqi banking industry Reference to this paper should be made as follows: Sadaa, A.M; Ganesan, Y; Yet, C.E. (2022). The Effect of Ownership Structure on the Nonperforming Loans in Iraqi Banks, J. Fin. Bank. Review, 7(1), 86 – 97. https://doi.org/10.35609/jfbr.2022.7.1(6)