“Financial ratios and book value of shares for selected money transfer companies listed on the Iraq Stock Exchange”

The study examined the nexus between the financial ratio and book value of shares for Iraqi money transfer companies. The data used was extracted from the financial reports of selected money transfer companies listed on the Iraq Stock Exchange, and a descriptive, correlation and panel least square regression technique were adopted for the analysis. The result revealed that the financial ratio captured by earnings per share (EPS), return on investment (ROI) and return on assets (ROA) were positively related with the book value of shares (BVAL), while debt ratio (DER) was negatively related with BVAL. Also, EPS, ROA, ROI and DER positively influenced BVAL. Thus, the en-gagement of competent and qualified personnel to manage the assets and investments in order to ensure optimal returns is urgently required. There is also a need for proper issuing of shares by the management of money transfer companies to ensure free ac- cess to the stock market.


INTRODUCTION
Recently, book value of shares (BVAL) is essential for anyone looking to obtain money and raise capital, especially in the stock market. In view of this, it is an undeniable fact that little is known about the Iraqi financial system, but several individuals want to know how the firms' shares are valued and what is the forecast for share prices in the future (Ibrahim, 2019). Thus, long-term investment and speculation require investors to know the book value of the stocks in which the knowledge of financial ratios cannot be overemphasized. A report from the Iraq Stock Exchange (2011) showed that the number of stocks in circulation were 693,433,876 shares, whose value was approximately 1,566,238,274 Iraqi Dinars, and the number of listed firms were 85 companies. However, the number of Iraqi firms trading on the Iraq Stock Exchange rise slightly after that year because of the essential roles the financial market played in the financial system.
The role of stock markets is very critical to the progress of any economy (Saymeh & Salameh, 2019), but the ability to monitor the activities of a stock market effectively remains an obstacle to the huge impact of the stock market on the Iraqi economy. Financial ratio allows the comparison of different firm performance meas-urements in both trend and comparative analysis. Financial ratio acts as an input to predict a firm's risk, future cash flows, financial distress and credit ratings. Accurate BVAL ascertained via effective financial ratio strengthens the company's reputation and position because financial ratios are essential not only for knowing the firm's financial position, but also for analyzing and interpreting the financial evaluation and situations of the entire company.
Since the 2003 regime change and the first and second Gulf wars, Iraq has been faced with various challenges, which have made the maintenance of economic stability in the country difficult. In fact, Iraq has been unable to create a functioning stock market (Ali, 2016). Certainly, the country can build on many sectors despite the huge challenges in the areas of state administration, corruption, public sector maladministration and fighting terror. In this regard, the Iraq Stock Exchange Market is taking steps to trade actively and is encouraging corporations to get listed and trade yet again. Money transfer companies have been identified to trade on the Iraq Stock Exchange, but inefficiently. Undoubtedly, one of the causes for this limitation is inappropriate financial analysis that can resolve an efficient financial ratio. This is due to the fact that the price to book value was a good measure for the individual's investment attention because when shares are sold below the book value, it is considered undervalued, and in the opposite way, when shares are sold over the book value, it is called overvalued. Hence, there is a need to know whether the financial ratios of such earnings per shares (EPS), return on investment (ROI), return on assets (ROA) and debt ratio (DER) have an impact on BVAL for the money transfer companies listed on the Iraq Stock Exchange.
It is clear that for more than 3,000 years, money and capital have played a vital role in humans' lives, and before this period humans used the barter system as a means of transaction. It is an undeniable fact that the economy of Iraq, as a developing country, also suffered from the weak role of financial markets. Moreover, Iraqi financial markets cannot perform the required role because of the absence of the investment environment and the loss of confidence. In 2004, the Iraq Stock Exchange was established by law No. 74, which was located in Baghdad. The main purpose of establishing this market was to develop local financial sectors that positively reflected the economy of Iraq. Thus, it consisted of several companies from various sectors such as banking, insurance, industrial and investment, hotels, tourism, agricultural and service companies. However, in other countries stock markets or financial markets play a vital role in economic growth (Hussein, 2013;Hassan & Sabah, 2019).
According to Hassan and Sabah (2019), to increase the role of financial markets and their regeneration in Iraq, some factors such as creating an appropriate environment of establishing companies and encouraging them to issue shares, allow investors to enter the stock market and encourage them to buy and sell shares of the listed companies. Raising public awareness of the importance of the market and how it works and simplifying procedures for those wishing to work through media, advertising, and others should be taken into consideration. Bratamanggala (2018) opined that issuing shares led to obtaining more capital with the belief that factors such as EPS, price to book value and ROA affected the share price. Similarly, Macharia and Gatuhi (2013) stated that as global competition increased, companies attempt to focus on issuing more shares to survive.
The Iraq Stock Exchange (2020) reported that the banking sector and money transfer companies were the most effective sectors in terms of the large volume of trading and the number of shares traded, followed by the industrial sector and its traded share prices, which are still the best prices compared to the rest of the other traded shares. Thus, it can be emphasized that cash is the most popular method of payment used by the larger percentage of individuals in the country, and a smaller percentage was observed to use credit card facilities or ATM machines. It was also noted that in Iraq and the Kurdistan region, when one needs to change currency, money transfer offices serve as an appropriate means instead of banks and other financial institutions. Agirman and Yilmaz (2018) (2015) investigated the impact of the financial ratio on the index of the stock market among the Turkish banks between the years 2002 and 2013. In the study, a sample of 13 Turkish banks from which data was gathered and analyzed using the least square regression technique was considered. It was discovered from the results that debt to equity ratio negatively impacted the Turkish banks' index. It was further found that shareholders' equity to total assets ratio positively influenced the growth of the index stock market. Thus, it was emphasized that changes in the index of the stock market resulted from variations in financial ratios of the Turkish banks under consideration.

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT
Hassan and Sabah (2019) examined the influence of some variables on the price of stocks indexed on the Iraq Stock Exchange over 10 years. Auto Regressive Distributed Lag (ARDL) model was adopted for the study and the variables were cointegrated. Having established a long-run equilibrium relationship between the variables, the impact of financial ratios such as EPS, ROA, ROI and DER on book value of listed money transfer companies was examined. Generally, the redundant growth of the Iraqi stock market has piqued interest as to whether full awareness of the effect of financial analysis by investors will improve the activities of the market.
Thus, the hypotheses below should be tested:

RESEARCH METHOD
Explanatory research design was used to examine the subject matter in this study. The study was carried out on randomly selected listed money transfer companies listed on the Iraq Stock Exchange. The selection of the companies was based on the availability of required and adequate information on the variables to be examined.

Model specification
Adopting the model specified by Agirman and Yilmaz (2018), the link between financial ratios and stock returns can be stated in functional form as: it it where BVAL -book value, EPS -earnings per share, ROA -return on assets, ROI -return on investment, DER -debt ratio, it µ -error terms, t -years (time), and i -money transfer companies (cross section).

Estimation and diagnostic techniques
The descriptive analysis, correlation and the panel least square regression technique were used in this study. Specifically, pooled effect and fixed ef-fect estimations were used. Post-estimation tests, such as a test for the coefficient of determination, T-test, standard error, F-test and probability test, were carried out.  Table 1 showed the results of the descriptive analysis of estimating the relationship between BVAL of shares and the financial ratio of the listed money transfer companies for the period from 2013 to 2017. The financial ratio was captured by EPS, ROA, ROI and DER. The result revealed on average that BVAL, EPS, ROA, ROI and DER were 1.0149, 0.0055, 0.0049, 0.0058 and 0.0445, respectively. The implication of the result is that an effort must be made to improve EPS, ROA, and ROI through an effective share price, assets and investment management to enhance better returns for the money transfer companies under considera-Source: Researchers' compilation, 2021.  The correlation coefficients presented in Table 2  The panel unit root test in Table 3 showed that all the variables were stationary at level. This was revealed as the probability of both Levin, Lin and Chu t statistic values, and Augmented Dickey Fuller (ADF) test statistical values for each of the variable was less than the probability of the error margin 0.05. This result establishes a short-run symmetry relationship between the variables. Table 4 showed the result of the pooled, fixed and random effect panel regression to assess the relationship between BVAL and the financial ratio captured by EPS, ROA, ROI and DER for-money transfer companies in Iraq. There is a linear relationship between BVAL, EPS, ROA, ROI and DER. Specifically, the result of the panel model exhibited that the financial ratio had a both positive and negative relationship with BVAL for the selected listed money transfer companies. Thus, it was revealed that EPS, ROA and ROI were positively related with BVAL for the listed money transfer companies, while DER was negatively related with BVA L . From the pooled effect model, the result further revealed that EPS, ROA and ROI prompted a development in BVAL for the selected money transfer companies to the tune of 0.09, 1.04 and 0.37 percent, respectively, while DER was negatively related with BVAL and thus impeded the performance of the selected money transfer companies by 0.02 percent.

Figure 1. Explanation of dependent and independent variables
The results from the fixed effect estimate shows that ROA, ROI and DER were positively related with BVAL for the selected money transfer com- Note: *, ** and *** -stationary with significance levels of 10%, 5% and 1%, respectively.
panies and, thus, a better performance of the companies to the turn of 1.21, 0.33 and 0.03 percent, respectively, while EPS was negatively related with BVAL and thus limited the performance of the selected money transfer companies by 0.34 percent.
The random effect model showed that EPS, ROA and ROI led to an improvement in BVAL for the selected money transfer companies to the tune of 1.18 and 0.37 percent, respectively, while EPS and DER were negatively related with BVAL and thus impeded the performance of the selected money transfer companies by 0.20 and 0.001 percent, respectively. These findings contradict studies by Menaje (2012) and Atidhira and Yustina (2017), which revealed that EPS and DER were positively related with share returns. This confirmed the position of Islamoglu (2015), who previously found an inverse relationship between the stock index and debt to equity ratio. This means that there are impediments to the performance of the selected money transfer companies under consideration in Iraq.
The probability values of 0.024, 0.013, 0.004 < 0.05 revealed that the estimated parameter of ROI for the three estimates was statistically significant in assessing the subject matter. However, the probability values (P > 0.05) revealed the insignificance of the estimated parameters of EPS, ROA and DER.  Hausman test result is shown in Table 5. The chisquare value 14.966 is greater than 9.488, and 0.0048 probability value is greater than 0.05. This means that the random effect estimate was consistent with the impact of the financial ratio on the book value of money transfer companies. Thus, the random effect estimate was better than the fitted fixed effect estimate, hence it was preferred. This made a random effect estimate when examining the impact of the financial ratio on BVAL for the money transfer companies selected for this study. Thus, the fact that the random effect model was found to be the most reliable, consistent, efficient and sufficient, led to the residual cross-sectional dependence (CD) test presented in Table 6.

CONCLUSION
An investigation of the impact of financial ratios on BVAL for the selected money transfer companies as revealed by the random effect model showed that ROA and ROI led to an improvement in BVAL for the selected money transfer companies. It was found that EPS and DER were negatively related with BVAL. Post-estimation tests revealed that ROI had a great effect on the book value of money transfer companies and thereby enhanced the performance of Iraqi money transfer companies. The heterogeneity study of the selected money transfer companies revealed that financial ratios, such as EPS, ROA, ROI and DER, positively influenced BVAL, particularly for AL-HA, ALAT, NOBL, ALNO and AL-NIB as money transfer companies. Furthermore, it was found that money transfer companies showed that EPS, ROA, ROI and DER negatively influenced BVAL for AL-RAB, MOUT and AL-MAN, respectively, in Iraqi money transfer companies.
Thus, it can be concluded that the management of money transfer companies must engage competent and qualified personnel to manage their assets and investments in order to ensure optimal returns. Information asymmetry should be minimal, and access to markets should be widened in such a way as to encourage investors and to be able to trade on the stock market. Operational efficiency, stability, profitability and liquidity give investors more pertinent information about companies. This allows analysts and investors to gain lucrative advantages in the stock market using widely accepted and debatably essential ratio analysis techniques.