The Impact of Asset Diversification on Financial Liquidity According to International Accounting Standards An Analytical Study of a Sample of Commercial Banks Listed on The Iraq Stock Exchange
Keywords:
Asset Diversification, Financial Liquidity, Asset Diversification Index, Liquidity Index, International Accounting StandardsAbstract
The researcher seeks through this study to measure the impact of asset diversification as an independent variable on financial liquidity as a dependent variable and determine the relationship between them by adopting international accounting standards, as this adoption depends on several important factors. It also causes many positive and negative effects. To achieve the objectives of the study and answer its questions, a sample of commercial banks was tested, including (4) commercial banks listed on the Iraq Stock Exchange for the period (2012-2021), using data from the financial reports published on the website of the Iraq Stock Exchange and the Securities Commission. Computer programs (Excel, EViews) were used to process the data and extract the financial and statistical results. The study concluded that there is a significant positive relationship between asset diversification and financial safety, and it also recommended that commercial banks diversify their assets by expanding investment activities, which contributes to enhancing their banking liquidity.
References
Al-Asadi, A. H. J. M., & Muhammad, H. M. (2005). Bank liquidity management and its impact on return and risk (Master's thesis). College of Administration and Economics, University of Kufa.
Al-Imam, S. A. M. A., & Al-Khazaali, R. A. K. S. (2017). Determining the optimal liquidity ratio in Iraqi commercial banks for the period (2005-2013). Journal of Accounting and Financial Studies, 12(41).
Apostolik, R., Donohue, C., & Went, P. (2009). Foundations of banking risk. John Wiley & Sons, Inc.
David, C., & Dionne, C. (2005). Banks' loan portfolio diversification. Industrial and Financial Economy, 1–58.
Duho, K. (2019). Bank diversification and performance in an emerging market. International Journal of Managerial Finance. https://doi.org/10.1108/IJMF-04-2019-0137
Ghosh, A. (2017). Real sector consequences of bank diversification: Evidence across U.S. industries and states. Journal of Financial Economics. https://doi.org/10.1108/JFEP-07-2017-0067
Hou, X., Li, S., Li, W., & Wang, Q. (2017). Bank diversification and liquidity creation: Panel Granger-causality evidence from China. Economic Modelling, 1–12. https://doi.org/10.1016/j.econmod.2017.12.004
Huynh, J., & Dang, V. D. (2020). A risk-return analysis of loan portfolio diversification in the Vietnamese banking system. Journal of Asian Finance, Economics and Business, 7(9), 105–115. https://doi.org/10.13106/jafeb.2020.vol7.no9.105
Kaufman, G. (2001). Macro-economic stability and bank soundness (Revised draft).
Koch, T. W., & MacDonald, S. (2015). Bank management (8th ed.). Cengage Learning.
Laeven, L., & Levine, R. (2005). Is there a diversification discount in financial conglomerates? National Bureau of Economic Research, 1–58.
Lole, M. (2009). Diversification strategies in the banking industry in Kenya. University of Nairobi, 1–41.
Mapatobha, M. C. (2020). Assessment of financial institution liquidity and sensitivity to market risks of CAMELS components. Innova.
Mishkin, S., & Serletis, A. (2004). The economics of money, banking, and financial markets (4th Canadian ed.). Frederic S. Mishkin.
Mishra, B., Swain, R. K., & Mishra, B. (2020). Exploring the impact of liquidity management on profitability: Evidence from commercial banks of India. Dogo Rangsang Research Journal, 10(8), 3.
Musa, S. N., & Abu Arabi, M. (2009). The extent of banks' use of diversification policy to reduce risks: An applied study on Jordanian commercial banks. Retrieved from https://www.iasj.net/iasj/article/72866 on 4/2/2023.
Qu, Z. (2018). Income diversification of Chinese banks: Performance, risk, and efficiency (Doctoral dissertation, Durham University Business School, University of Durham).
Ramli, H., & Qarfi, A. (2021). Measuring banking performance using the American Early Warning Model (CAMELS). Journal of Economic Studies, 8(1), 147–166.
Saloum, H. A. K., & Nouri, B. M. (2009). The role of international accounting standards in reducing the global financial crisis. In The Seventh International Scientific Conference (pp. 1–12). Zarqa Private University, Jordan.
Thabet, H., & Thanoun, A. A. W. (2017). Methods of adopting international standards for preparing financial reports and their impact on enhancing the economic reform process in Iraq. In The Third International Forum on Modern Trends in Accounting (pp. 1–12). University of Umm Al-Bawaqi, Algeria.
Ul-Huq, S. M. (2019). Can BRICS and ASEAN-5 emerging economies benefit from bank diversification? Journal of Financial Regulation and Compliance, 1358–1988. https://doi.org/10.1108/JFRC-02-2018-0026
Chen, H. J., & Budidarma, M. (2020). Performance of banks in Indonesia: The importance of bank diversification and corporate governance. Integrative Business and Economics Research, 91–104.
Brown, M., Trautmann, T., & Vlahu, R. (2014). Understanding bank-run contagion. Working Paper, European Central Bank.
Wu, W., & Ausina, E. T. (2020). Bank diversification and focus in disruptive times: China, 2007–2018. Departament d’Economia, Universitat Jaume I.
Onuorah, A. C. (2021). Bank diversification strategies and financial performance in the Nigerian economy. International Journal of Intellectual Discourse, 153–164.
Laing, N., & Rhoades, S. (1991). Asset diversification, firm risk, and risk-based capital requirements in banking. Review of Industrial Organization, 49–59.
Kolum, M. C. (2016). A micro and macro prudential approach to financial soundness assessment of commercial banks in Kenya. Strathmore University, Nairobi.
IFRS Foundation. (2010). Framework-based understanding and teaching. IFRS Foundation.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Shaymaa Abdulhusein Abdulkadhim Alisawi, Ali Yousif Ali, Ahmed Abdulkadhum Abdulabass
This work is licensed under a Creative Commons Attribution 4.0 International License.
