The Impact of Capital Structure on the Growth of Islamic Banks Operating in Syria

Abstract

This study aims to examine the effect of capital structure on the growth of Islamic banks operating in Syria from 2011 to 2023. The sample consisted of three Islamic banks. The independent variable represents capital structure, expressed through internal financing measured by the ratio of total equity to total assets, and external financing measured by the ratio of total deposits to total assets. The dependent variable represents banking growth, measured by total asset growth. The study included control variables: profitability, liquidity, inflation rate, and the political stability index.

To achieve the research objective, the Autoregressive Distributed Lag model using the Pooled Mean Group estimator (PMG/ARDL) was used to test cointegration relationships among the variables, based on quarterly panel data, following unit root tests to ensure stationarity of all series. The results revealed a statistically significant and negative effect of both internal and external financing on the growth of Islamic banks. In light of these findings, the study recommends enhancing equity utilization and deposit investment efficiency, while reducing idle liquidity, to support banking growth.