The impact of financial leverage on the performance of Libyan commercial banks

An applied study on Wahda Bank

Abstract

The study aimed to analyze and discuss the impact of financial leverage on the performance of Libyan commercial banks through analyzing the financial data for the study’s variables represented by financial leverage as an independent variable and performance as a dependent variable represented by the liquidity, lending and profitability ratio of the bank as well as the capital efficiency ratio of the Unity Bank. The study used financial analysis with financial ratios to arrive at To the goal of the study, the most important results of the study were the increase in the value of the liquid assets of Libyan commercial banks compared to their total deposits. This shows that these banks have idle assets, which will negatively affect the bank’s profitability and performance. This increase came as a result of the bank’s preference for investments with high liquidity and low risks. Such as Libyan commercial banks investing a large portion of their assets in certificates of deposit of the Central Bank of Libya, which are characterized by their high degree of liquidity and low profitability, which has significantly affected the profitability rates of these banks. A large portion of Libyan commercial banks’ risk-weighted assets consists of credit facilities and accounts receivable under settlement. Considering these assets as an indicator of commercial banks’ commitment to international standards for debt classification in accordance with the controls of regulatory and supervisory authorities such as the Central Bank of Libya and the Basel III agreement.