The impact of banking diversification on financial soundness An analytical study of a sample of commercial banks listed in the Iraq stock exchange.

Abstract

 Purpose: Through this study, the researcher seeks to appear the impact of banking diversification as an independent variable in financial soundness as a dependent variable and determine the type of relationship between them, as asset diversification and income diversification were used as indicators to measure  banking diversification in the current study, and the indicators of the global classification system (CAMEL) were relied upon to measure financial soundness, which are as follows: (capital adequacy, asset quality, management efficiency, profitability, liquidity).

Methodology / Design: 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 by using the financial indicators and statistical methods as multiple regression analysis. In addition to normal distribution, unit root test for investigating the stability of time series, and using the statistical program (EViews-12) in order to data processing and extraction of financial and statistical results.

 Conclusion: The study concluded a set of conclusions, the most prominent of which was, banks can use diversification, whether 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 that is commercial banks can benefit from the bank diversification in proving the level of financial soundness indicators. The study recommend that the commercial banks must have banks diversification policy whether through approach of assets diversification or income diversification. In addition to the necessity that the diversification be relied upon scientific and studied fundamentals and the ratios that can through it proving the financial soundness.