Tobit Regression Analysis Applied on Iraqi Bank Loans

摘要

It occurs quite often in economic data to find variables describing a specific phenomenon which are censored from right side or left side. When the data has to be censored from left side at censored point equal to zero, the Tobit regression model represents the most appropriate model to use. In this paper, we study the determinants of bank loans value, which is one of the main banking services provided by banks in any country. They are considered the most important banking activity, allowing the bank to achieve an appropriate profit with small risks. These loans aim to finance short term needs for covering expenses, or financing investment projects that allow the development of institutions. The study aimed to apply Tobit regression model and Ordinary least squares method in order to reveal the most important factors affecting loans provided by Iraqi banks and the best method to estimate data .It was found that liquidity and loan repayment affect the Iraqi Bank Loans, while the effects of interest rate and borrowers were not statistically significant. The results from Tobit and OLS estimations shows that bias can result when estimating Iraqi bank loans using OLS if bank loans are restricted.