Financial leverage is considered one of the most important pillars in the formation of the assets of business establishments and commercial banks, so it receives the attention of its departments, because of its role in revitalizing its business and in order to achieve its goals. On the other hand, financial return and risk are two conflicting goals, In the sense that achieving one of them is at the expense of the other and this contradiction affects the main objective that the financial management seeks to achieve, which is maximizing the market value of the shareholders' wealth. Here comes the role of leveraged investment policies, which express the level of investment in leveraged elements (cash, temporary investments, receivables, inventory). To resolve this conflict and find a kind of exchange between them in order to achieve the goals for which they were created. This is what the research will address.

A significant increase in liquidity through financial leverage means a higher bank liquidity and lower profitability and vice versa. On the other hand, the management of banks in general suffers from a special problem called the problem of banking management, which results from the conflict in the objectives, which are (increase the return or reduce the risk), Therefore, the bank must follow financial policies in investing in the elements of financial leverage to ensure that it achieves an exchange between return and risk. Hence, the research problem was derived with the following question: (What is the ability and effectiveness of the investment policy through financial leverage in solving the conflict problem and achieving an exchange of risk and return)?

In order to pique the interest of the business establishments and commercial banks that have been studied in dealing with such a topic, the research concentrated on a crucial and significant topic in the field of financial management, namely the financial leverage and investment policies in it and the extent of its contribution to achieving the exchange between return and risk. Increasing the knowledge of its financial managers of the concept of leverage policy and its importance and the role that it can play in achieving the exchange between return and risk. The research is based on a main hypothesis that "there is a significant impact of the investment policy in financial leverage on the return and risk in the commercial banks, the sample of the research" and several sub-hypotheses are branched from it.

The most important conclusions he reached were to consider the issue of financial leverage and investment in it as one of the topics that fall into the core of the tasks of the financial manager in banks and that most academic studies stress the importance of financial leverage in reducing liquidity risks and maximizing the return. The poor management of the elements of financial leverage results in the bank being exposed to one of two things, as keeping what is less than the bank’s need of elements of financial leverage such as cash may expose it to the risks of financial hardship and the consequent incurring additional costs resulting from attempts to manage bank loans or sell securities from a portfolio his investments at a price below its market price, On the other hand, the increase in loans through financial leverage in excess of the bank's need for cash means an increase in risks at the expense of achieving returns if this increase is invested in more profitable areas such as financial investments instead of keeping it in cash. And he concluded that return and risk are two inseparable and conflicting goals at the same time and the conflict comes from the fact that achieving one of them is at the expense of the other and that the preference for increasing the return over risk or vice versa depends on the bank’s policy and the extent of its risk tolerance and the financial manager of the bank can achieve exchange between them through investment policies in leverage elements, The results of the statistical analysis also showed that there is a significant effect between the ratios of investment in financial leverage on the right of ownership in the Middle East Bank, the Investment Bank and Babylon, as well as on the assets in Babel Bank alone and on the rate of return on liquidity risks in the Bank of Baghdad, Babylon and Sumer, as well as on the rate of return on the rate of return on the financial risks in Sumer and Gulf Bank alone.

The First Requirement: The Conceptual Framework for Financial Leverage

First: The Concept of Financial Leverage: When a corporation relies on borrowing money from financial institutions to meet its demands, it is said to be using financial leverage. As a result, its fixed financial costs in this situation are the interest payments made on the debt. But if the company is offering preferred shares to meet its needs, then the fixed financial costs here are, the dividends from the preferred shares that the company will pay to the efficient shareholders, because the preferred shares enjoy guaranteed and specified profits [1].

He further defined the term "financial leverage" as "the use of other people's money with fixed financial costs and it may be the money of others (loans or preferred shares), as both of them have a fixed financial cost and the company must commit to paying it." In other words, the relationship between financial leverage and the financing structure of the company is established. The degree of financial leverage increases with the amount of reliance on outside sources of funding. The financial leverage becomes effective if the company is able to invest the borrowed funds at a rate of return that exceeds the cost of the borrowing funds and if the company does not succeed in this, it will be exposed to a greater risk and achieve a greater loss, which means losing the advantage of using financial leverage in the company’s financing structure [2].

Luoma and Spiller [3] confirmed that the financial leverage negatively affects the company’s flexibility in paying its financial obligations to others and that the high level of financial leverage obliges the company’s management to reduce its expenses, especially in the field of research and development in order to provide liquidity for debt service This, in turn, negatively affects the company's competitive position and its production efficiency in the future.

Financial leverage or trading in property, as it is sometimes called, is the extent to which the borrower is able to achieve an increase in the return on equity and the extent to which it is related to the financing structure. The more dependence on external sources (debt) to finance the company's investments, the financial leverage increases and its impact on the return on investment is positive or negative [4].

It was also pointed out that financial leverage is the change that occurs in the return available to owners, i.e. net profit after tax or earnings per share, as a result of a certain change in net profit before interest and taxes, where financial leverage arises from the presence of fixed financial costs represented in loan interests and stock dividends. With other factors remaining unchanged, the degree of financial leverage increases as the fixed financial costs increase. Which means a change at a certain rate in the net profit before interest and taxes, which entails a greater change in the net profit after tax, i.e., the net profit available to the owners or the earnings per share.

Second: The Definition of Financial Leverage

They pointed out that financial leverage (that is, the use of financing with a fixed cost). The financial leverage was also defined as (the extent or percentage of the increase in profits as a result of using the funds of others (borrowing) in the company’s operations in order to finance the needs) [5].

Financial leverage is defined as (Trading in the Equity) due to the presence of the owners’ money. This is an element of safety for creditors [6] and financial leverage is defined as (the potential use of fixed financial costs, such as interest, in order to maximize the impact of changes that You get operating Earnings Before Interest and Taxes (EBIT) in Earnings Per Share (EPS). As there are two types of fixed financial costs that may be present on the company's income statement are the interests paid on the indebtedness and the dividend for preferred shares, which the company must pay regardless of the low profits. The financial leverage appears with the appearance of fixed costs in the income statement, that is, when the company has to pay interest as a result of its use of borrowed financing [7].

From the previous definitions, the researcher sees that financial leverage is the use of fixed-cost financing from creditors to meet the company’s needs and finance its investments in return for paying a certain amount of money represented by paying the principal amount as well as interest, in order to obtain additional profits to increase the dividend divisor for the share to raise the value of the share and thus raise the value of the company.

Third: The Relationship Between Financial Leverage, Operational Leverage and Total Leverage

There is a similarity between the idea of operating leverage and financial leverage, because both are based on the principle of improving profitability by taking advantage of the fixed characteristic of some expenses, as the case of operating leverage is concerned with the change that occurs in Earnings Before Interest and Tax (EBIT), as a result of changes in sales revenue, any small change in sales revenue An increase or decrease may lead to a significant change in profits before interest and taxes, as the presence of fixed costs is what makes any change in sales by a certain percentage result in a change in operating profits by a larger percentage, This is because fixed costs are costs that do not depend on the volume of production or sales and the company is obligated to pay those costs (i.e., its use of operating leverage, is low), the change in sales revenue may lead to the same change in profits and even be less and the more the company depends on its production operations on Fixed assets the higher the operating leverage and vice versa and the more production costs are focused on labor and daily wages, the lower the degree of operating leverage, The higher the leverage factor, the higher the sales volume that achieves breakeven as well. The impact on profits increases when a change in sales volume occurs, as the operating leverage has its impact on income before interest and taxes. If leverage is used in addition to operating leverage, changes in income before interest and taxes, have a greater impact on earnings per share. Therefore, if the company uses a large amount of operational and financial leverage, the occurrence of even small changes in the level of sales will lead to greater fluctuations in the return on the share [8].

Operating Leverage

Operational leverage is defined as designing profits by increasing reliance on fixed costs at the expense of variable costs and this means replacing machinery and equipment instead of labor. If the company succeeds in reducing its variable costs represented by labor and increasing its fixed costs represented by machinery and equipment, it can increase its profits but it You will be exposed to greater risks and through operating leverage can bring about changes in the prices of the cost per unit due to changes that occur in operating activities as a result of the company's use of operating leverage [9]. A company that has the ability to control its production processes and has the ability to use highly automated processes with high fixed costs and low variable costs means that it uses operating leverage with a high degree and that its break-even point is in a high level of sales and changes in the level of sales will have significant impact on increasing profits, As for the company whose use is limited mechanism with low fixed costs and high variable costs, it uses low operating leverage and the break-even point will be at a low level of sales and its impact on profits will be simple [10]. Operational leverage is described as a double-edged sword, as it maximizes profits in the event of increased sales and maximizes losses in the event of reduced sales [11].

Financial Leverage

If the operating leverage is related to the company’s cost structure, then the financial leverage is related to the financing structure and financial leverage means the purchase of fixed assets from borrowed funds, which means the company’s attempt to invest the borrowed capital to achieve a return greater than the cost of borrowing. There is a link between investment and leverage. Investment opportunities depend on the abundance of funds in the market and the financial leverage ratios increase with the increase in the cash flow risks that rights holders obtain, so the required rate of return on equity increases by increasing the risks [12].

Total Leverage

Through the relationship discussed about operational leverage and financial leverage, it is possible to find the total leverage that is the product of the two types of leverage. As leverage is a double-edged sword that results in a greater change in the return, by increasing or decreasing, as a result of a certain change in sales (operating raise) or in net profit before interest and tax (financial leverage) and since the return is related to the company’s ability to fulfill its obligations towards funding sources, Increasing the degree of financial leverage carries with it an increase in the risks to which these sources are exposed.

The coupling of operating leverage with financial leverage in a particular company is called total leverage. If there is a particular company and the company’s assets are fixed assets on the one hand and its capital structure includes loans and liabilities on the other hand, the Earnings Per Share (EPS) are affected by any change in revenue the sales, This is because the operating leverage affects the sales revenue from the income statement, then the financial leverage comes to complement that effect in the profit before interest and taxes part of the income statement, as any change in sales revenue gives a greater change in the net operating profit before interest and taxes and this is the result of operating leverage, Likewise, any change in the operating net profit before interest and tax (EBIT) gives a greater change in the profitability or earnings per share (EPS) and when operating and financial leverage combine in a company, any small change in the level of sales leads to a large change in the profitability one arrow (EPS) [13].

Fourth: Capital Structure Policies and the Effects of Financial Leverage

Perhaps it is appropriate to start by saying that the function of financial management is limited to three main decisions: the investment decision, the financing decision and the dividend decision. The investment decision is related to the selection of successful investment projects and opportunities, the result of which is reflected in a profit for the company and appears on the right side of the balance sheet. As for the other decision, it is related to choosing the appropriate (optimal) financing mix of funds required for the establishment of the project, a mixture that reduces the cost to the minimum, which appears on the left side of the budget.

To clarify the concept of Financing, two basic terms must be explained: The financial structure and the capital structure of companies.

The financial structure of the company is a combination of the sources of financing chosen by the company to cover its investments and the financial structure of companies consists of a group of elements that form the side of liabilities and the right of ownership in the budget, whether these elements are long-term or short and whether they are borrowing funds or proprietary funds [14].

As for the relationship of financial leverage with the capital structure, the more the company uses indebtedness in the capital structure, the greater the use of financial leverage and consequently, a significant change will occur on the shareholders’ returns [15].

The Policies of the Capital Structure

The company chooses its capital structure policy in light of many considerations and with the change of these considerations, its structure changes. However, the company’s management must always have a specific vision of its financial structure in light of these changes. If the actual percentage of the company’s borrowed funds is less than the target percentage, the expansions of the company It is represented in increasing the borrowing rate. Either if the borrowing rate is higher than the target percentage, the additional financing will be made through the company's capital [16].

The Effect of Financial Leverage on the Capital Structure

The Effect of Financial Leverage on Stock Returns: The correlation between expected returns and financial leverage increases internally as a result of optimal investment and the financial policies followed in the company [12].

And that the relationship between the returns (return on shareholders and return on equity) associated with financial leverage and under any financial structure, we find that the profits per share and the return on equity for shareholders increases as the leverage increases and thus the increase in leverage leads to an increase in the degree of volatility in each of the earnings per share and returns to equity at each degree of sales volatility [10]. Also, the profit per share in the joint-stock company is positively or negatively affected by the content of the financing structure of the company. When the company borrows at a fixed-cost rate to finance its operations and investments, it achieves a return on investment that exceeds the cost of debts. This will lead to an increase in the return distributed to shareholders. This is one of the advantages of the leverage Finance. But if the company is not able to achieve a return that exceeds the cost of financing debt from its investments, then the financial leverage becomes negative [17].

The Second Requirement: Financial Leverage and Its Impact on Risk and Return

First: The Trade-Off Between Risk, Return and Stock Returns: The exchange between risk and return is one of the firm foundations on which the company builds its investment decisions and its goal is to maximize the market value of the wealth of shareholders who wish to obtain returns on shares in exchange for the risk that their money is exposed to as a result of their investment. When they sacrifice cash (liquidity), they are exposed to some risk. Since they fear risks, they prefer cash flows that enjoy stability and regularity. The market value is a function of both the volume of returns as a percentage of the invested funds and the risks due to the dispersal of cash flows [18], as every investment has risks associated with it as well as returns resulting from it. The greater the risks, the more it becomes necessary for the project to achieve greater returns in order to become attractive to investors and the financial manager, in his quest to maximize the value of the shareholders' wealth (increasing the share price in the market), must reconcile between returns and risks [19]. In addition, risk and return are the main factors that affect the market value of shareholders' wealth and consequently, the company's share price in the market. In order to attract investment, there must be a (return) to compensate the investors who own the company in order to bear the risks and to postpone their current consumption to the future, If the investor obtains compensation, he will accept the risks and usually they look for the assets and investment tools that give the greatest return with the least level of risk [20]. The issue of return and risk is one of the most important issues that must be taken into account in the field of investment evaluation, as the risk is linked to the expected return, so making investment decisions and the comparison between projects and securities (such as stocks) does not depend only on the expected cash flow but the risk element must be taken into account into consideration [13].

One of the most crucial components of a company's continued existence is its returns. The potential of fulfilling objectives and the continued existence of businesses depend on generating returns. On the other side, ongoing losses cause the depletion of assets and the degradation of property rights, which ultimately results in creditors taking control of the business. The issue of returns as a proportion of sales, total assets and property rights and not just the amount of returns, should be considered when the company wants to succeed and remain in business. The most crucial thing is to regularly assess the consistency and stability of returns because these are more desirable than experiencing sudden earnings for a set period of time [21].

Risks are also one of the important and most influential factors in the value of the company in terms of companies entering the technological field, the means and tools used and the increase in competition between them, especially after countries adopted the open market policy, allowing multinational companies to conduct their activities in various countries and the emergence of signs of economic globalization, Undoubtedly, the entry of companies leads to high risks that may lead to their loss and devaluation in the market unless they identify the sources of risks, hedge them and reduce them after analyzing and managing them to reduce the possibilities of loss, which leads to an increase in the level of the company in the market and ultimately to maximizing the wealth of shareholders [22].

The risk is defined as (the probability of unsatisfactory results but the risks have different meanings according to the field of application) [23] and the risk is also defined as (the probability of fluctuation of future returns from investments and that it is moving away from the values of the variable from its arithmetic mean). The risk in the field of leverage can be defined as (the degree of uncertainty in the company's ability to cover its operational and financial obligations). As for the definition of risks in the field of financial investments, it is (the variance in the expected returns) [24] and he defined the risks as the possibility of exposure to unexpected and unplanned losses as a result of the fluctuation of the expected return on a particular investment (the difference between the actual return and the expected return) In other words, the risks represent the deviation of the actual numbers from the expected numbers [14].

The financiers view risk as deviation from expectations [24], while in management, the concept of risk means the uncertainty of the completion of a particular action and the possibility of results that are different from what was planned or disappointing [25].

And that the Committee on Banking Regulation and Risk Management emanating from the Banking Sector Authority in the United States of America (FSR) has defined risks as, (the possibility of loss occurring either directly through losses of business results or capital losses or indirectly through the presence of restrictions that limit the ability of the company to achieve its goals and objectives) as such restrictions lead to weakening the ability to continue providing business and practicing activities on the one hand and limit the ability to exploit the available opportunities.

And since the debt ratio (D/E) is a measure of risk and that the increase of these risks with the increase in the debt ratio, this motivates the management to choose methods and policies that lead to increased returns in the current period, especially if the debt ratio is high in order to create a good impression on the lenders about the company’s ability In paying its debts on the specified dates in order to avoid the high percentage or cost of the borrowed capital [26].

The return is related to risk in a direct relationship, meaning that the higher the investor's ambition to achieve a higher return on his investments, he must prepare himself to bear higher degrees of risk. It is related to the nature of the investor and the degrees of risks that he is willing to bear in his investment decisions. The conservative investor is convinced of a modest return on his investments in exchange for reducing the risks surrounding those investments, while the adventurer turns to areas of investment with high levels of risks in pursuit of a high return [27].

Given the importance of returns, the process of forecasting and estimating them has become of interest to researchers and writers, as one of the objectives of publishing financial statements is to enable investors in the financial markets to predict corporate returns and the reasons that helped predict returns is the need to develop better forecasting models by management [28].

Second: The Relationship Between Financial Leverage, Financial Risk and the Required Rate of Return

To clarify the relationship between these variables, which represent very important axes in financial management decisions and its interest in formulating the financing structure and the desire to include borrowed financing in the financing structure and to show the impact of financial leverage through the financing structure and by testing for three levels, The first level includes the financing structure without financial leverage and the second and third level includes different percentages of financial leverage. The result of the test was that the higher level of financial leverage was more profitable than the first and second levels, as the net profit before interest and taxes is expected to rise [29].

Financial Risk

Financial risk means those additional risks borne by the company’s shareholders, resulting from the management’s reliance on long-term loans in the financial structure to finance the company’s assets and the fixed costs incurred by the management such as interest and the possibility of not being able to repay the principal of the loans at their due dates or interest or both, they are risks linked to loans and the origin of these risks is not only borrowing, Rather, the potential for earnings that are anticipated to be smaller than the interest rate on such loans and this means that the financial management will be exposed to losses due to the low profitability below the level and the costs borne by the company and this in itself is a financial risk [30] and management can adjust the level of financial risk by adjusting the level of financial leverage [31]. The financial risk is the risk that is incurred by the project owner in the event that he uses the indebtedness [7]. The financial risk is determined by the fluctuation in the net profit after tax, i.e. the fluctuation in the remaining return to owners (shareholders) due to the use of sources of financing with a fixed cost represented by loans, as the company is exposed to a large rate change in the return available to owners as a result of a change at a lower rate in net profit before interest and taxes [32].

Regarding the association of financial risks with borrowed financing, the use of financial leverage in the financing structure is offset by a rise in the rate of return on equity, which results in an increase in the company’s risk degree by the amount of risks resulting from financing by borrowing, which is the financial risk, which requires determining the optimal financing mix that leads to a balance between the return and risk.

The effect of financial leverage depends largely on the company’s ability to achieve income, rate of return and its cost. When the return on assets is higher than the cost of borrowing, the positive effect of financial leverage appears but when the return is less than the cost of borrowing, the negative impact of leverage appears due to the low return, which means, the high degree of risk [33].

On the other hand, this relationship can be clarified from another side, as the risk-free interest rate represents the money price paid by any secured borrower and the first is estimated at the interest rate on government bonds. The risk-free interest rate, which consists of two parts, is called the real interest rate (*r) and the second is called the inflation premium (IP) and is equal to the inflation rate. r_RF = r*+IP.

That is, the higher the expected rate of inflation, the higher the inflation premium must be raised to compensate the investor. Increasing the riskless rate of return by an amount that leads to an equal increase in the return on all risky assets and the reason is that the inflation premium that goes into calculating the riskless rate of return is included in the calculation of rates of return on all assets. As the required rate of return on any share rises, the rate of inflation increases itself [8].

On the other hand, the nominal risk-free rate of interest does not necessarily change the market risk, which is equal to the required rate of return on the market portfolio minus the risk-free rate of return. When the riskless rate of return rises, the required rate of return on the market portfolio may rise in a way that leads to the market risk premium remaining the same. In other words, the change in the riskless rate of return leads to a change in the required rate of return on the market and this results in the stability of the market risk premium [30].

The relationship between the expected state of the economy and the performance and size of companies lies through the relationship between the state of the economy and the returns on investment in companies [23]. As investing in large companies has the ability to diversify its products and this diversity helps to earn a higher rate of return, lower risks and the possibility of failure is little, unlike small companies. In addition, large companies are able to obtain loans easier because of their financial and material capabilities and better guarantees than small companies. 

In other words, companies whose cost is high have great investment opportunities, unlike small companies that do not have investment opportunities. As the companies that have more investment opportunities have greater returns and may have less need to borrow and the reason for this is that these investment opportunities absorb the excess cash flows in the company. These investment opportunities have varying risks. Investing in treasury bills has little risks because the return on treasury bills is fixed and is not affected by what happens in the market, meaning that the value of beta = zero (because the risks are measured by the beta coefficient). As for investing in the market’s portfolio of ordinary shares, it is more risky and the value of beta = 1 in the sense of medium risk, so the investor asks for a higher return than the return on treasury bills and the difference between the return on the market and the interest rate is called the market risk premium, As for the beta whose value is greater than one, the amount of risk for it will be high and accordingly the investor demands a return greater than the return on the market portfolio. If the investor is thinking of obtaining the highest expected return with an average standard deviation (medium risk), he must diversify his investments in more than one investment portfolio. If he invests in treasury bills, he gets a return against a standard deviation = zero and when he diversifies with his investments to get the highest expected return, he invests in a more risky portfolio, so the returns will be high, Either the standard deviation is divided between the two portfolios and meets at a certain point so that it is less than if diversification was not used and there is a point between the portfolios through which the investor obtains the highest expected return against any risks and the return at this point is at its peak and this point is called the optimal portfolio.

Since the process of evaluating securities depends primarily on the required rate of return, it was necessary to find models that are used to measure this return, so many pricing models have appeared. The capital asset pricing model is one of the models that can be used to determine the required return on investment in a security. Thus, it is one of the most important tools to help in making investment decisions in terms of determining the relationship between returns and risks [15].

Third: Returns

Return is one of the most important performance measures. The correlation between the rate of return and the magnitude of the investment determines the rate of return. but in fact the return has different concepts and meanings. The financial analyst has what he cares about his understanding of the return, the management of returns and what they contain and guarantee of manipulation and tricks of its concept of return and each beneficiary and dealer with the company has his own concept of returns, which means that the concept of returns is broad and has many implications. But what is agreed upon is that it is a relative concept with future implications [34].

There are many disagreements about the concept of return on capital employed, return on investment and return on equity, because they are still terminology based on accounting data. When investors buy stocks and bonds, they focus mainly on the returns they expect to get from those investments. The annual return on the stock attracts the first attention as it is predicted through what the company has achieved in previous years. However, the total investment return must include with it any capital gains or losses that accompany owning the stock during the holding period, Therefore, one of the important matters in investment is the necessity of measuring the investment returns on the various stocks that are traded in the market, as the results may have a significant impact on the investment decision [35] and the management should study and evaluate investments of any kind, If it is not possible to maximize the return, then the cost must be reduced [36].

Fourth: Risk and its Types

Risk is the possibility of the returns realized from the expected returns, whether the variance increases or decreases and the risk means that the investor will fail to achieve the expected return on the investment [37]. Risks are mainly divided into systemic risks, which are the risks that cannot be avoided by diversification, as they affect all companies because they are linked to the movement of the market and this is why it is called market risk. They are risks related to the share price and require diversifying the company’s portfolio to meet these market movements and can be expected from the financial market cycles (supply and demand) and irregular risks are risks specific to the company, called diversification risks and they arise from factors specific to the company to be invested in and are independent of factors that affect the economic activity as a whole, such as strikes in that company or administrative errors within the company or competition that the company faces by other companies operating in same domain [20] and it can be removed by diversification because it is attributable to the circumstances of the company or industry to which the company belongs [22].

Unsystematic risks are divided into business risks and financial risks [34]. Business risk affects the company’s income before interest is paid and is affected by the volume of sales, prices, input costs, market strength and growth level.

Fifth: The effect of financial leverage on stock returns:

The correlation between expected returns and financial leverage increases internally as a result of optimal investment and the financial policies followed in the company [12].

And that the relationship between the returns (return on shareholders and return on equity) related to the financial leverage and under any financial structure, we find that the profits per share and the return on equity for shareholders increases as the leverage increases and thus the increase in leverage leads to an increase in the degree of fluctuation in profits for each share. and returns to equity at each degree of sales volatility [23]. Also, the profit per share in the joint-stock company is positively or negatively affected by the content of the financing structure of the company. When the company borrows at a fixed-cost rate to finance its operations and investments, it achieves a return on investment that exceeds the cost of debts, which will lead to an increase in the return distributed to shareholders. This is one of the advantages of financial leverage but if the company is not able to achieve a return that exceeds the cost of financing debt from its investments, then the financial leverage becomes negative [17].

The financial leverage is linked to the financing structure and the more the company relies on borrowing to finance its investments, the higher the degree of financial leverage in it and the impact of the financial leverage on the return on investment ROI will be positive if the company’s management succeeds in investing the borrowed funds so that it achieves a rate of return on investment that exceeds the interests paid in exchange for obtaining on this money [38].

Leverage can increase the expected flows of profits for each share and not for the share price and the reason for this is that the change in the expected flow is equal to the change in the rate of profits to capital and this means that the expected return on assets is equal to the operating income divided by the total market value of the securities the company, As the expected return on the company's shares that are raised increases in proportion to the increase in the ratio of debt over equity and this increase depends on the expected return on the portfolio for all the company's securities, as well as the expected return on the indebtedness. The higher these flows, the higher the expected returns of the company.

Increasing the financial leverage ratio in the company's financing structure increases the return in times of boom in the company's activities and enables the company to achieve relatively large profits but this leads to the shareholders bearing financial risks due to the high degree of sensitivity to the change in the share of profits. Usually, the company is exposed to risks in its business as a result of the uncertainty of achieving the planned returns [17].

The uses of returns are determined by being a tool for measuring the effectiveness of the economy's activity and a criterion for making important decisions. It is a means in the hands of decision makers and is used to measure the impact of indebtedness and lending on profitability. Since returns are divided into revenue returns and capital returns, revenue returns measure the returns of basic operations in calculating the ratio of after-tax exploitation to assets. The capital returns bear the total formula, as it measures the total returns by the ratio of net profits to the share of shareholders. Therefore, calculating the effect of financial leverage or the so-called indebtedness effect is determined by the difference between returns and the cost of indebtedness [39].

And the effect of financial leverage depends on the company’s income. If the income is greater than the break-even point, the return to the shareholder will increase by increasing the financial leverage or if it is less than the break-even point, then the return on the share decreases with the leverage and the return is not affected when the operating income is equal to the break-even point, At this point, the return on the share is equal to the interest rate on the debt, so the decision on the capital structure is determined according to the expected investment opportunities for income and since it is expected that the operating income will be higher than the level of the break-even point, it is possible to increase the financial leverage in the hope of achieving higher returns for shareholders.

The effect of financial leverage is measured on a simple principle, as it is the product of the flexibility of the reward allocated to the company's external capital (debt) and through a comparison between returns and costs. If the returns exceed the costs, the leverage will have a positive effect and vice versa, if the costs are greater than the returns, this will lead to a decrease in the shareholders' returns, so the leverage will have a negative effect [39].

Testing the Research Hypotheses is the Third Requirement

This topic is devoted to the statistical analysis of the research variables, to test its hypotheses, to show how much these hypotheses are accepted or not and to examine the impact of the independent variable indicators portrayed in the investment policy on raising the financial level. Which is (the ratio of investment in leverage [X₁]), in the indicators of the dependent variables represented by the bank return and its indicators are (the rate of return on equity [Y₁] and the rate of return on assets [Y₂]), banking risk and its indicators are (the liquidity risk rate [Z₁] and the financial risk rate [Z₂]) and the extent of its contribution to realizing the exchange between them by relying on leverage.

Analysis of the Effect of the Investment Leverage Ratio (X₁) on the Rate of Return on Equity (Y₁)

The first sub-hypothesis deriving from the main hypothesis, "the substantial influence of the ratio of leverage investment on the return on equity of commercial banks, the research sample," was tested using simple linear regression and the findings are displayed in Table 1.

Table 1: The Impact Relationship of the Investment Ratio in Financial Leverage (X₁) on the Rate of Return on Equity (Y₁)

Source: Using statistical software (SPSS) and (excel)

The regression line equation between the dependent variable (rate of return on equity or Y₁) and the primary variable (investment leverage ratio or X₁) was extracted using Table 1 and the resulting linear regression equation was as follows:

(Y₁ = + X₁)

with the values listed below for the regression equation:

Return on equity for investments made by Middle East Bank of Iraq: 350,862+(-3.471) (investment leverage ratio). The above equation is applied to the other banks in the research sample. (Y₁ = + X₁) and the values for the regression equation are as follows:

Rate of return on equity for Middle East Bank of Iraq investments: 350,862+(-3.471) (investment leverage ratio). For the remaining banks in the research sample, the aforementioned equation is used.

Even if the rate of return on equity is zero, the value of the fixed limit (a) in the Table 1 indicates that the Iraqi Middle East Investment Bank has a leverage ratio of (350.862) and this also holds true for the rest of the study sample. The coefficient of change (B) values were shown in Table 1, which means that a change of one unit in the independent variable's value causes a change of one unit in the rate of return on equity (Y₁) value in the research sample banks. These changes were to varying degrees, ranging from positive to negative. Regarding the impact factor's (F) value and its degree of significance (Sig), all of the research sample had a positive value for (F), indicating that there is a relationship of influence between the two indicators and it was significant in three banks, notably (Bank of Baghdad, Bank of Babylon, Bank of Sumer), Given that the computed significance level (Sig) is lower than the significance level established by the study, which is (0.05), Because the value of (Sig) exceeds the indication level endorsed by the research, the impact on the remaining banks was minimal. In Table 1, the coefficient of determination (R₂) explains the degree to which the investment ratio in financial leverage affects the rate of return on equity. where the highest proportion of exegesis in the Bank of Baghdad was (0.606), meaning that (60.6%) of the total differences between the dependent variable (Y₁) and independent variable (X₁) could be attributed to the independent variable (X₁) and (39.4%) of the differences were caused by other factors. Regarding the decline in the interpretation rate, it occurred at the Investment Bank and was equal to (0.046), which indicates that (4.6%) of the total differences of the dependent variable (Y₁) are explained by the variable (X₁) and (95.4%) are the result of other factors.

Analysis of the Effect of the Investment Leverage Ratio (X₁) on the Rate of Return on Assets (Y₂)

The second sub-hypothesis resulting from the main hypothesis, that there is a significant relationship between the ratio of investment in financial leverage and the rate of return on assets in the study's sample of commercial banks, was tested using simple linear regression. The results are shown in Table 2.

Table 2: How Financial Leverage's Investment Ratio (X₁) Affects the Rate of Return on Assets (Y₂)

Source: Using statistical software (SPSS) and (excel)

Beginning with the dependent variable (the rate of return on assets) (Y₂) and the primary explanatory variable (the investment leverage ratio) (X₁), the regression line equation was extracted and the linear regression equation was as follows:

Y₂ = + X₁

and the values for the regression equation are as follows:

Rate of return on assets for Middle East Bank of Iraq for Investment: -937.160+11.145 (investment leverage ratio). And the remaining banks in the research sample are used with the aforementioned equation.

Even though the rate of return on assets is equal to zero, the value of the fixed limit (a) in Table 2 indicates that there is an investment ratio in the financial leverage of (-937.160) for the Iraqi Middle East Bank for Investment and this also holds true for the remainder of the study sample. Regarding the values of the coefficient of change (B), it signifies that a one-unit change in the independent variable's value causes a corresponding change in the rate of return on assets (Y₂) in the research sample banks. These changes were in degrees ranging from positive to negative Either all banks had a positive regression line coefficient (F), indicating a significant and statistically significant association between the two indicators or Babel Bank was the only bank with a positive regression line coefficient (F), Because the value of (Sig) is more than the level of The indication adopted by the research, the effect on the remaining banks was not significant. Either the coefficient of determination (R₂), which explains the extent to which investment in financial leverage has an impact on the rate of return on assets. As it had the greatest rate of interpretation in the Babel Bank (0.480), it meant that (48%) of the total differences for the dependent variable (Y₂) could be attributed to the independent variable (X₁), while the remaining (152%) were explained by other factors. The National Bank had a decline in the interpretation rate, which reached (0.004), indicating that (0.4%) of the total variance of the dependent variable (Y2) is explained by the variable (X₁), while the remaining (99.5%) is attributable to other causes.

Analysis of the Impact of the Investment Ratio in the Financial Leverage (X₁) on the Rate of Return on Liquidity Risk (Z₁):

The third sub-hypothesis of the main hypothesis, which states that there is an incorporeal effect of the investment ratio in financial leverage on the rate of return on liquidity risk in commercial banks in the research sample, was tested using simple linear regression and the results are shown in Table 3.

Table 3: The Relationship Between the Rate of Return on Liquidity Risk (Z₁) and the Investment Ratio in Financial Leverage (X₁) for the Banks in the Research Sample

Source: Using statistical software (SPSS) and (excel)

The following is the extracted regression line equation between the primary explanatory variable (leverage investment ratio) (X₁) and the true value of the dependent variable (rate of return on liquidity risk) (Z₁):

Z₁ = a+bX₁

The values for the regression equation are as follows: Rate of return on liquidity risk at Middle East Bank of Iraq for Investment: -144.931+1.483 (investment leverage ratio). And the remaining banks in the research sample are used with the aforementioned equation.

The value of the fixed limit (a) is displayed in Table 3, which indicates that even if the rate of return on liquidity risk is zero, the Iraqi Middle East Bank for Investment has an investment leverage ratio of (-144.931) and the same holds true for the other sample banks. search, according to the values of the coefficient of change (B), which fluctuated between positive and negative values, a change in the value of the independent variable (X₁) by one unit causes a change in the value of the rate of return on liquidity risk (Z₁) in the banks of the research sample. The value of (B) reached (1.483, 0.313), indicating that the increase of one unit in the ratio of investment in financial leverage results in a change in the rate of return on liquidity risk and an increase of (1.483) for the Iraqi Middle East Investment Bank and (0.313) for the Investment Bank, respectively. The positive change was attained in two banks (the Investment Bank and the Iraqi Middle East Investment Bank), For the other banks, the value of (B) was negative, which means that the Bank of Baghdad, the National Bank, the Credit Bank, the Babel Bank, the Sumer Bank and the Gulf Bank all saw a decrease in value when the value of (X₁) was changed by one unit, resulting in a decrease in value of (Z₁) of (0.001), (0.159), (1.745), (0.099), (0.099) and (0.094), respectively. It was significant and statistically significant in only three banks, namely (Middle East Iraqi Investment Bank), (Investment Bank) and (Babylon Bank), because the value of (Sig) The calculated significance level is less than the significance level used by the study, which is (Sig) the regression line coefficient (F) was positive in all banks, indicating that there is an impact relationship between the two indicators (0.05). Because the value of (Sig) is bigger than the degree of significance permitted by the research, the influence on the remaining banks was not statistically significant. Either the coefficient of determination (R₂), which clarifies the extent to which the ratio of financial leverage investment on the rate of return on liquidity risk, since it had the greatest rate of interpretation in the Babel Bank (0.699), this indicates that the independent variable (X₁) could account for 69.9% of the variance in the dependent variable (Z₁) and that the remaining third (30.1%) was explained by external factors. The Sumer Bank had the lowest rate of interpretation, which came in at (0.032). This indicates that (3.2%) of the variations in the dependent variable (Z₁) can be accounted for by the variable (X₁) and (96.8%) can be attributed to other causes.

Analysis of the impact of the financial leverage ratio (X₁) on the rate of return on financial risks (Z₂)

The fourth sub-hypothesis resulting from the main hypothesis, which states that there is an incorporeal effect of the investment ratio in financial leverage on the rate of return on financial risks in the commercial banks in the research sample, was tested using simple linear regression. The results are displayed in the Table 4.

Table 4: shows how the investment ratio of financial leverage (X₁) affects the rate of return on financial risks (Z₂)

Source: Using statistical software (SPSS) and (excel)

The equation for the regression line between the primary variable (the investment leverage ratio) (X₁) and the dependent variable (the rate of return on financial risk) (Z₂) may be seen in Table 4 as follows:

Z₂ = a+bX₁

The values for the regression equation are as follows: Ratio of return on financial risk at Middle East Bank of Iraq for Investment: -117.959+1.255 (investment leverage ratio). And the remaining banks in the research sample are used with the aforementioned equation.

Even if the rate of return on financial risks is equal to zero, the value of the fixed limit (a) in Table 4 indicates that there is an investment ratio in the financial leverage of (-117.959) for the Iraqi Middle East Investment Bank. This also holds true for the remaining commercial banks in the research sample. From Table 4, the coefficient of change's value (B) was visible (4), which quantifies the change in the independent variable's value by one unit (1) that causes a change in the rate of return on financial risks (Z₂) in the banks in the research sample by a value of (B), which it manifested to varied degrees, ranging from positive to negative, Either the impact factor (F) value was positive in all banks, indicating a significant impact relationship between the two variables or the effect only had an impact on Sumer Bank and Gulf Bank and not the other banks. Due to the fact that the value of (Sig) exceeds the significance threshold used in the research, Either the coefficient of determination (R₂) explains the extent to which the ratio of financial leverage investment on the rate of return on risks, as it reached the highest rate of interpretation in Sumer Bank (0.612), which indicates that the independent variable (X₁) was able to explain (61.2%) of the total differences for the dependent variable (Z₂) or (38.8%) of the differences are attributable to other factors. The interpretation rate decreased in the credit bank and reached (0.009), indicating that (0.9%) of the variance in the dependent variable (Z₁total)'s values can be attributed to the independent variable (X₁) and (99.1%) to external variables.

The Fourth Requirement: The (Reciprocal) Relationship Between Return and Risk

Companies seek to achieve a trade-off between return and risk in their implementation, which leads to maximizing the return and minimizing the risk [17]. The expectation is that when high risks are accepted, the investor must be compensated with high returns. There is a close relationship between return and risk, especially in investing in securities and investing in assets in general. Any investment decision does not depend on return only in any way in light of a changing and dynamic environment, so there must be a risk that must be calculated in that equation, the reason for this danger is the internal and external environmental changes that lead to loss, which necessitates anticipation and precaution for that expected loss, so it was called a risk with its two types, regular and irregular. If investors seek higher returns, they must undertake investments with higher risks. The higher the investment risks, the greater the expected returns in return, in order for there to be a justification or encouraging and temptation for investors to invest, bearing greater risks, in the hope of obtaining higher returns. This direct relationship between returns and risks is what is known as the exchange of returns and risks [6].

Investing in Leverage, Return and Risk

If the banking sector desire that the research sample's equity and asset return ratios be changed, the rate of liquidity risk, the rate of financial risks and the realization of the exchange between them, the bank can use the investment leverage to achieve this, whether by increase or decrease, because the increase in investment in financial leverage and by the amount of one unit (1) it leads to a change in the rates of return and banking risk for the banks of the research sample, in different proportions, as shown in the Table 5.

Table 5: The effect on the risk and return ratios as a result of increasing the investment ratio in financial leverage by one unit.

Source: Using statistical software (SPSS) and (excel)

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