Exploring the nexus between banking stability and market value: Evidence from the Iraqi banking sector
Exploring the nexus between banking stability and market value: Evidence from the Iraqi banking sector

Summary/Abstract: Purpose: This study aims to investigate therelationship between banking stability and marketvalue in the Iraqi banking sector, exploring how thestability of banks impacts their market capitalization.Methodology: The study employs a quantitativeapproach, utilizing financial ratios such as return onassets, equity/assets, and the z-score index toquantify banking stability. Market value is measuredusing banks' share prices and outstanding shares. Asample of 17 Iraqi banks is analyzed over a four-yearperiod, employing statistical analysis to examine therelationship between banking stability and marketvalue. Results: The findings reveal a positiverelationship between banking stability and marketvalue. Banks with strong risk management practices,adequate capital buffers, and effective regulatoryoversight inspire greater confidence amongdepositors and investors, translating into highermarket valuations. Conversely, banks facing poorgovernance, high non-performing loans, and thincapital cushions struggle to achieve stability, erodingtheir market value. Theoretical Contribution: Thestudy contributes to the existing literature byproviding empirical evidence on the crucial role ofbanking stability in shaping market valuations. Ithighlights the importance of sound bankingpractices, regulatory frameworks, and riskmanagement in enhancing investor confidence and,ultimately, the market value of banks. PracticalImplications: The findings offer insights forpolicymakers, regulators, and financial institutions inIraq and other regions. Promoting banking stabilitythrough enhanced prudential oversight, governancepractices, risk management capabilities, andfinancial inclusion can favorably impact the marketvaluation and development of the banking system.

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