The role of liquidity analysis in achieving financial efficiency of the commercial banks in Iraq: An applied study on a sample of banks working in Iraqi Stock Exchange

Abstract

This study aims to investigate the role of liquidity analysis in achieving the financial efficiency of Iraqi commercial banks through an applied study on a sample of banks listed on the Iraq Stock Exchange. The importance of the study stems from the fact that liquidity is one of the most critical financial indicators relied upon by bank management to ensure the timely fulfillment of financial obligations while maintaining an appropriate balance between profitability and financial efficiency. The study adopts a descriptive-analytical approach based on the published financial statements of the selected banks during the study period. Several statistical techniques are employed to analyze the relationship between liquidity indicators and financial efficiency indicators, including descriptive statistics, Pearson correlation, regression analysis, and significance tests.The findings reveal a statistically significant relationship between liquidity analysis and financial efficiency. Maintaining an appropriate level of liquidity enhances banks' ability to manage their financial resources efficiently and achieve a balance between profitability and risk, which positively reflects on financial performance indicators. The results also indicate that excessive liquidity holdings may reduce returns due to idle funds, whereas insufficient liquidity increases the risk of financial distress and the inability to meet financial obligations. Accordingly, the study recommends that Iraqi commercial banks adopt effective liquidity management policies, strengthen risk management and internal control systems, and utilize modern forecasting models to estimate liquidity requirements. These measures would contribute to improving financial efficiency and enhancing the stability and competitiveness of the Iraqi banking sector.