Business Administration Insights: Understanding Financial Distress in the Iraqi Banking Sector

Abstract

Due to the combination of political instability, economic dependence on oil and systemic governance issues, significant financial distress has been faced by many Iraqi banks. Current research investigates the main causes and impact of financial distress in the Iraqi banks. Moreover, strategies to overcome such challenges are also described by the study. For this purpose, mixed methodological approach was utilized. The quantitive data was composed of primary and secondary data obtained from various bank statements while, the qualitative research was done by conducting face-to-face interviews with key stakeholders. The results of the study suggest that a strong correlation between NPLs and financial stress is present. Moreover, the study also highlights the needs for reforms in regulatory oversight and economic diversification to reduce the vulnerabilities of all the banking sectors. The study recommends strengthening the regulatory framework, improve corporate governance and reduce Iraq’s economic reliance on oil. This research helps the policy makers, bank mangers and the regulators to enhance the resilience of the banking system of Iraq.