Adopting the Simultaneous Equations System to Determine the Interaction of Financial Health Components and how they Ipmact Value-Based Performance Index An Analytical Study of a Sample of Banks Listed in the Iraq Stock Exchange for the Period (2014-2023)

Abstract

The current study aims at exploring the importance of financial health in the banking sector and its impact on achieving value-based performance by using instantaneous equations to determine the interaction of financial health components for a sample of banks listed on the Iraq Stock Exchange for the period 2014-2023. Accordingly, three indicators can be adopted to measure financial health: capital adequacy index, financial solvency index, and indebtedness index, then relying on the simple linear regression method to know the effect of each financial health indicator on the value-based performance indicator. To achieve the study objectives, the study adopted a main hypothesis "There is no effect of financial health components in achieving value-based performance - market added value - for the banks in the study sample." The study reached several results, the most important of which is the use of the instantaneous equations system solution method to know the interaction between financial health indicators. The study gave relatively accurate results, and the experimental results of the study varied between the three indicators. The study also recommended the necessity of conducting a continuous assessment of the level of financial health by the Central Bank to encourage banks to pay attention to financial health indicators and publish the results of the assessment to maximize the market value added of banks, as banking disturbances are considered a major threat that can affect the national economy and customer confidence. So, banks must take the necessary preventive measures and digital transformations to maintain the health of their banking systems.