The Impact of Banking Risks on Banking Efficiency: An Applied Study on a Sample of Commercial Banks Listed on the Iraq Stock Exchange for the Period (2008–2023)

Abstract

The study aimed to examine the impact of banking risks on banking efficiency using a sample of Iraqi commercial banks listed on the Iraq Stock Exchange. The analysis was based on data from 12 privately owned Iraqi commercial banks covering the period 2008–2023, with a particular focus on investigating the effects of the dimensions of banking risks on both technical efficiency and managerial efficiency. The significance of the study stems from the vital role of the banking sector in promoting economic and financial stability, as well as the growing international emphasis on banking risk management in light of the Basel Accords and contemporary financial challenges.The study adopted a descriptive-analytical approach and employed a range of statistical and econometric techniques to achieve its objectives and test its hypotheses. Time-series tests, correlation and regression analyses, and the Autoregressive Distributed Lag (ARDL) model were applied using SPSS V.23 and EViews V.12.The findings revealed a statistically significant correlation between the overall banking risk index and technical efficiency. At the level of the individual dimensions of banking risk, however, the results indicated variation in the correlation relationships, with liquidity risk being the only type of risk that exhibited a statistically significant correlation with technical efficiency, whereas the remaining banking risk dimensions showed no significant correlation. Regarding managerial efficiency, the results demonstrated a statistically significant correlation between the overall banking risk index and managerial efficiency. Significant correlations were also found for most banking risk dimensions, except for capital adequacy risk, which showed no statistically significant correlation with managerial efficiency. With respect to the causal relationships, the results indicated that the overall banking risk index had a statistically significant effect on technical efficiency. Partial analysis further revealed that both liquidity risk and leverage risk exerted significant negative effects on technical efficiency, while the remaining banking risk dimensions had no statistically significant effects. Similarly, the overall banking risk index was found to have a significant negative effect on managerial efficiency. In addition, liquidity risk, capital adequacy risk, and leverage risk each had significant negative effects on managerial efficiency, whereas the other banking risk dimensions did not exhibit statistically significant effects.Based on these findings, the study recommends strengthening risk management systems in Iraqi banks, enhancing managerial efficiency, reinforcing banks' capital bases, and further developing regulatory and technological frameworks to promote financial stability.