The impact of banking diversification on financial soundness

An analytical study of a sample of commercial banks listed in the Iraq stock exchange

Abstract

This study aims to measure the impact of banking diversification as an independent variable on financial soundness as a dependent variable, as asset diversification and income diversification were used as indicators to measure banking diversification in the current study, and the indicators of the (CAMEL) model were relied upon to measure financial soundness, namely: (capital adequacy, asset quality, management efficiency, profitability, liquidity).  The study adopted the inferential approach that allows the researcher to identify the problem and then collect and analyze the relevant data, and in order to achieve the objectives of the study and answer its questions, a sample of commercial banks was tested, including (18) commercial banks listed on the Iraq Stock Exchange for the period (2012-2021), using the financial reports data published on the website of the Iraq Stock Exchange and the Securities Commission. Some financial indicators and multiple regression analysis were used in the analysis of Data and extraction of financial and statistical results. The study concluded a set of conclusions, the most prominent of which was that banks can use diversification, whether it is income diversification or asset diversification in order to enhance financial soundness, as the study empirically proved that banking diversification affects financial soundness indicators positively, as well as proved that banking diversification positively affects the level of financial soundness according to the Global Assessment Model (CAMEL). The study also made a number of recommendations and suggestions for the future.