DETERMINANTS OF THE FINANCING STRUCTURE AND THEIR IMPACT ON THE INVESTMENT DECISION: ANALYTICAL STUDY OF A SAMPLE OF PRIVATE BANKS LISTED IN THE IRAQ STOCK EXCHANGE

This study analyzes the factors affecting investment decisions in Iraqi private banks between 2013 and 2023. The findings indicate that profitability is the most significant determinant; a strong positive relationship is observed between investments and increased return on assets (ROA). In contrast, banks facing liquidity constraints are found to reduce investment activities due to cash flow limitations. Interestingly, traditional factors such as bank size, tangible asset ratios, sales growth, cost of capital, financial flexibility, and operational risk do not have a measurable effect on investment preferences. While the results align with the "pecking order" theory, which emphasizes internal profitability as an investment determinant, they question certain assumptions of the "agency" theory regarding organizational characteristics. However, the model explains only a moderate portion of the variations in investment decisions, pointing to the potential impact of external factors not included in the analysis, such as macroeconomic conditions or the regulatory environment. For banking practitioners, these findings highlight the importance of maintaining a strong profitability structure and carefully managing liquidity positions to enhance investments. From a policy perspective, it is understood that traditional bank characteristics are not as effective as financial performance indicators in shaping investment behavior. The study also acknowledges certain limitations, such as potentially overlooked variables and constraints regarding generalizability to non-private or Islamic banking institutions. These findings contribute to the understanding of corporate investment behavior in emerging banking markets and suggest new avenues for future research.