The Impact of Capital Structure, Liquidity, and Profitability on the Market Value of the Bank of Baghdad: An Analytical Study for the Period (2010–2025)
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Abstract This study aims to analyze the impact of capital structure, liquidity, and profitability on the market value of the Bank of Baghdad during the period 2010–2025, based on the importance of financial indicators in explaining bank valuation in the stock market. Market value was used as the dependent variable, while capital structure, liquidity, and profitability were employed as independent variables. Market value data were obtained from the closing share price and the number of listed shares in the Iraq Stock Exchange, whereas financial data were derived from the annual reports and financial statements of the Bank of Baghdad. The study employed an econometric approach based on the Augmented Dickey–Fuller (ADF) unit root test, Johansen cointegration test, and Vector Error Correction Model (VECM). The findings revealed that all variables were stationary at the first difference, indicating that they are integrated of order one, I(1). Both the Trace and Maximum Eigenvalue tests confirmed the existence of one cointegrating vector at the 5% significance level, indicating a long-run equilibrium relationship among the study variables. The VECM results showed a negative and significant effect of capital structure on market value, while liquidity and profitability had positive and significant effects, with profitability being the most influential variable in enhancing the market value of the Bank of Baghdad. The adjusted coefficient of determination reached approximately 63.5%, confirming the importance of the selected financial variables in explaining changes in market value. The study concludes that improving the efficiency of capital utilization, maintaining an optimal level of liquidity, and enhancing profitability are essential for supporting and increasing the market value of the Bank of Baghdad.
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