Efficiency, market concentration and bank performance during the COVID-19 outbreak: Evidence from the MENA region

Mateev, Miroslav; Tariq, Muhammad Usman; Sahyouni, Ahmad

doi:10.1371/journal.pone.0285403

Cited by 8 publications

(1 citation statement)

References 86 publications

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“…Our paper seeks to make the following contributions to the literature on the determinants of banks’ performance. First, to the best of our knowledge, this study, along with those by Mateev et al [ 16 , 17 ], represents one of the few analyses on the determinants of Islamic and conventional bank performance that utilise such a large sample. It takes into account 159 conventional and 111 Islamic banks from 12 countries, which makes our data base unique.…”

Section: Introductionmentioning

confidence: 99%

Is the profitability of Islamic and conventional banks driven by the same factors?—A study of banking in the Middle East

Sobol,

Dopierała,

Wysiński

2023

PLoS ONE

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The purpose of this paper is to contribute to the existing literature by investigating the determinants of the profitability of Islamic and conventional banks in the Middle East region and revealing the most important factors for these two types of banks. Few papers have studied the performance of Islamic banks and compared their performance with conventional banks. The results from these limited research papers are also various, mainly because the sample sizes are small, or they have analysed data only from one country. Our research used a fixed effect panel data analysis on a sample of 270 banks (111 Islamic and 159 conventional banks) from 12 Middle East countries. We used an unbalanced annual panel of data covering the period 2012–2020. The results show that bank size, equity to assets, annual GDP growth, and annual average oil price have a significant positive effect on Islamic banks’ profitability, while non-performing loans to total gross loans and cost of running operations to operating income have a significant negative effect on both bank types. The results also show that non-performing loans to total gross loans and annual GDP growth contribute more to conventional banks profitability, while oil price contributes only to Islamic banks performance. Inflation and net loans to total assets have no effect on bank profitability for either Islamic or conventional banks. Furthermore, we also found that the Islamic banking industry had a more competitive structure. Our findings have important implications for managers, policy makers, investors and other stakeholders. They can help them to make decisions regarding investments, plans, budgeting, evaluation and the management of business operations.

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Section: Introductionmentioning

confidence: 99%

Is the profitability of Islamic and conventional banks driven by the same factors?—A study of banking in the Middle East

Sobol,

Dopierała,

Wysiński

2023

PLoS ONE

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Sustainable performance during the COVID-19 pandemic: a comparative analysis of Islamic and conventional banks

Mateev,

Nair,

Mostafa Khan

2024

Journal of Sustainable Finance & Investment

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Bank performance and financial stability during the COVID-19 pandemic: lessons from the MENA region

Mateev,

Sahyouni,

Moudud-Ul-Huq

et al. 2024

EMJB

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PurposeThis study investigates the role of market concentration and efficiency in banking system stability during the COVID-19 pandemic. We empirically test the hypothesis that market concentration and efficiency are significant determinants of bank performance and stability during the time of crises, using a sample of 575 banks in 20 countries in the Middle East and North Africa (MENA).Design/methodology/approachThe main sources of bank data are the BankScope and BankFocus (Bureau van Dijk) databases, World Bank development indicators, and official websites of banks in MENA countries. This study combined descriptive and analytical approaches. We utilize a panel dataset and adopt panel data econometric techniques such as fixed/random effects and the Generalized Method of Moments (GMM) estimator.FindingsThe results reveal that market concentration negatively affects bank profitability, whereas improved efficiency further enhances bank performance and contributes to the banking sector’s overall stability. Furthermore, our analysis indicates that during the COVID-19 pandemic, bank stability strongly depended on the level of market concentration, but not on bank efficiency. However, more efficient banks are more profitable and stable if the banking institutions are Islamic. Similarly, Islamic banks with the same level of efficiency demonstrated better overall financial performance during the pandemic than their conventional peers did.Research limitations/implicationsThe main limitation is related to the period of COVID-19 pandemic that was covered in this paper (2020–2021). Therefore, further investigation of the COVID-19 effects on bank profitability and risk will require an extended period of the pandemic crisis, including 2022.Practical implicationsThis study provides information that will enable bank managers and policymakers in MENA countries to assess the growing impact of market concentration and efficiency on the banking sector stability. It also helps them in formulating suitable strategies to mitigate the adverse consequences of the COVID-19 pandemic. Our recommendations are useful guides for policymakers and regulators in countries where Islamic and conventional banking systems co-exist and compete, based on different business models and risk management practices.Originality/valueThe authors contribute to the banking stability literature by investigating the role of market concentration and efficiency as the main determinants of bank performance and stability during the COVID-19 pandemic. This study is the first to analyze banking sector stability in the MENA region, using both individual and risk-adjusted aggregated performance measures.

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Efficiency, market concentration and bank performance during the COVID-19 outbreak: Evidence from the MENA region

Cited by 8 publications

References 86 publications

Is the profitability of Islamic and conventional banks driven by the same factors?—A study of banking in the Middle East

Is the profitability of Islamic and conventional banks driven by the same factors?—A study of banking in the Middle East

Sustainable performance during the COVID-19 pandemic: a comparative analysis of Islamic and conventional banks

Bank performance and financial stability during the COVID-19 pandemic: lessons from the MENA region

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