The Impact of Banking Density on Competitiveness in Iraqi Commercial Banks (2005-2024): A Panel Data Analysis

Abstract

This research examines how banking density affected the competitiveness of Iraqi commercial banks between 2005 and 2024. Using panel data from Rafidain Bank, Bank of Baghdad, and the Iraqi Islamic Bank, we made a composite competitiveness index. We used Principal Component Analysis (PCA) to combine deposits, profits, customer activity, and operational performance. We ran several econometric tests to check the relationship between density and competitiveness. These included unit root tests, pooled and fixed-effect models, Hausman and Breusch–Pagan tests, Granger causality, and Driscoll–Kraay robust standard errors. Our results show that banking density helped bank competitiveness during most of the years. This effect grew stronger after 2014, when Iraqi banks began adapting to technological shifts. However, the data reveals a clear non linear trend. The gains from expanding branches start to drop after a certain point, probably because of high operational costs and market saturation. Therefore, we believe that Iraqi banks should focus on service quality, efficiency, and digital channels instead of just opening more physical branches.