The Impact of Determinants of Commercial Banks' Profitability on Banking Sustainability

Sima Hassan Alshammari; Zahraa Kadhim Majeed; Rassol Abd Aljalil Mahdi; Mohammed Faez Hasan

Sima Hassan Alshammari
Zahraa Kadhim Majeed
Rassol Abd Aljalil Mahdi
Mohammed Faez Hasan

Keywords: determinants of profitability, banking sustainability, inflation, market value added

Abstract

The determinants of profitability are among the indicators affecting the performance of commercial banks and thus their sustainability, as they have in themselves become a problem facing banks considering the rapid changes in the banking world and its technologies. Therefore, the study aimed to identify the determinants of profitability and their impact on banking sustainability, as it adopted two external determinants, inflation and GDP. The gross domestic product and two internal determinants are the growth of deposits and loans. The research was applied to a sample of commercial banks listed on the Iraq Stock Exchange, represented by the selection of (8) banks, namely Baghdad, Iraqi Commercial, Middle East, Investment, Iraqi National, Credit, Sumer Commercial and the Iraqi Gulf, for the period 2005-2021, and used the descriptive analytical approach to variables with the aim of evaluating and measuring the independent variable (determinants) and the dependent variable (banking sustainability) represented by market value added and earnings per share using the statistical program (EViews V9) and the Panel Data application. Analysis was made according to the three models (aggregative regression model, fixed effects model, random effects model). According to this analysis, it was found that the determinants significantly affect banking sustainability indicators at a significance level of 5% and 10%. The study concluded the need to support the Iraqi banking sector by highlighting on indicators of banking sustainability; the weak and unstable banking system creates a turbulent environment that leads to a financial crisis that negatively affects the rest of the economic sectors.

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