Determinants of the Capital Structure: Empirical Evidence from Iraq

Abstract

This study aimed to examine capital structure determinants of the private Iraqi banks listed on the Iraq "Stock Exchange" for the period 2014-2018. This study reviewed various models of capital structure in order to form proposals regarding the capital structure determinants of the Iraqi private commercial bank. This study used the combined ordinary least squares and econometric techniques; random effects and fixed effects so as to explore the important aspects affecting the selection of the bank's capital structure. The results of the study indicated that size, profitability, and investment opportunities available to the bank are positively related to the debt ratio (financial leverage). Conversely, liquidity proportion is negatively associated to the debt ratio. The study revealed that assets tangibility and assets growth did not show any relationship with the bank debt ratios. This study laid a basic foundation of exploring the determinants of the capital structure of private Iraqi banks on which a more detailed evaluation can be based. Moreover, the empirical results of the current study will help the bodies responsible for managing banks take optimal capital structure decisions.