Does Banking Market Power Matter on Financial (In) Stability? Evidence from the Banking Industry in MENA Region

Labidi, Widede; Mensi, Sami

doi:10.9734/bjemt/2015/18061

Cited by 2 publications

(2 citation statements)

References 37 publications

(32 reference statements)

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“…Studies on the bank market power use different methods such as OLS regression, panel data with fixed effects (FE) or random effects (RE), and GMM (Ahmed & Hla, 2019; Alexiou, Vogiazas, & Nellis, 2018; Almaqtari, Al‐Homaidi, Tabash, & Farhan, 2019; Amidu & Wolfe, 2013; Cheuathonghua & Padungsaksawasdi, 2019; Jiménez, Lopez, & Saurina, 2013; Labidi & Mensi, 2015; Soedarmono et al, 2011). On the other hand, the QR method is more robust to outliers (Feng & Huang, 2020; Lyon & Olmo, 2018; Oliveira, Tabak, de Lara Resende, & Cajueiro, 2013) and thus more appropriate for the analysis of the interest margin, as it considers the conditional distribution of the regressor (dependent variable), which in our case is not homogeneous 1 and has an increasing hetero trend.…”

Section: Methodsmentioning

confidence: 99%

“…As a consequence, risk-averse banks may charge higher margins to compensate for the risks associated with both the direct and indirect effects of inflation, suggesting that bank margins may vary positively with inflation. Jiménez, Lopez, & Saurina, 2013;Labidi & Mensi, 2015;Soedarmono et al, 2011). On the other hand, the QR method is more robust to outliers (Feng & Huang, 2020;Lyon & Olmo, 2018;Oliveira, Tabak, de Lara Resende, & Cajueiro, 2013) and thus more appropriate for the analysis of the interest margin, as it considers the conditional distribution of the regressor (dependent variable), which in our case is not homogeneous 1 and has an increasing hetero trend.…”

Section: Control Variablesmentioning

confidence: 99%

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Does market power explain margins in dual banking? Evidence from panel quantile regression

2021

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This paper examines whether banks with greater market power have more control over the net interest margin. To this end, we employ panel quantile regression (QR) to a sample of Islamic and conventional banks from 14 dual banking countries during 2005-2018. Our empirical findings show that greater market power in a dual banking system results in a higher net interest margin, which is in line with the mainstream theory of monopolistic competition. After introducing the Islamic interaction dummy in the model, we find that in the case of Islamic banks the result is significant only for higher quantiles of bank margins. This study also has some policy implications, namely that the concentration of market power can be countered by developing a competitive environment among the banks to have competitive bank margins. We further suggest that to get a higher profit margin, Islamic banks need to be more competitive and more efficient while deciding the profit margins.

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Section: Methodsmentioning

confidence: 99%

Section: Control Variablesmentioning

confidence: 99%

Does market power explain margins in dual banking? Evidence from panel quantile regression

2021

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Another Look at ‘Bank Competition and Financial Stability: Much Ado About Nothing’?

Bandaranayake

Das

Reed

2020

Journal of Economic Surveys

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This study replicates Zigraiova and Havranek's (2016) meta‐analysis of banking competition and financial stability. It performs multiple types of replications: a ‘Reproduction’ replication where Z&H's data and code are verified to reproduce the results of their study; a ‘Repetition’ replication where the studies used by Z&H are independently recoded and then re‐analysed; an ‘Extension’ replication where additional studies on banking competition and stability are analysed; and a ‘Robustness Analysis’ where we check Z&H's results using an alternative empirical procedure. Our analysis strongly confirms Z&H's main finding that competition in the banking sector has an economically negligible effect on financial stability. This result is consistently confirmed across a variety of replication analyses. Most impressively, we confirm their finding even when we analyse a completely independent set of 35 studies not included in Z&H's meta‐analysis. Our results for Z&H's other findings are less supportive. As the first comprehensive replication of a meta‐analysis, this study also provides insights into the robustness of meta‐analysis. We find that meta‐regression analysis, where estimated effects are related to data, estimation, and study characteristics, is sensitive to how data are coded and to the choice of estimation procedure; and that this sensitivity extends to ‘best practice’ estimates.

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Does Banking Market Power Matter on Financial (In) Stability? Evidence from the Banking Industry in MENA Region

Abstract: The various financial crisis incidents during the two last decades and particularly since the 2007-2008

Cited by 2 publications

References 37 publications

Does market power explain margins in dual banking? Evidence from panel quantile regression

Does market power explain margins in dual banking? Evidence from panel quantile regression

Another Look at ‘Bank Competition and Financial Stability: Much Ado About Nothing’?

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