The financial impact on reducing the threat of bankruptcy: An applied study on bringing about radical change in the Iraqi stock market (2015-2024)

Abstract

This study explores the impact of financial flexibility, as an independent variable, on mitigating bankruptcy risk, as a dependent variable, in a volatile Iraqi banking environment. The study focuses on a sample of three private commercial banks during the period 2015–2024. It employs a descriptive-analytical approach, using leverage, liquidity, and profitability indicators to express flexibility, and the Z-score model to measure bankruptcy risk. The results indicate that financial flexibility plays a crucial role in enhancing the stability of the banking sector. Banks that balance debt financing with equity demonstrated a greater ability to avoid crises, with liquidity serving as the first line of defense against unforeseen risks. Therefore, the study recommends implementing financial policies that ensure a minimum level of flexibility and adopting the Z-score model as a periodic monitoring tool. It also emphasizes the need to balance safety and profitability requirements to guarantee the sector's sustainability and growth.