Political risk and bank stability in the Middle East and North Africa region

Al-Shboul, Mohammad; Maghyereh, Aktham; Hassan, Abul; Molyneux, Phillip

doi:10.1016/j.pacfin.2020.101291

Cited by 65 publications

(37 citation statements)

References 110 publications

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“…Prior studies have mainly focused on the determinants of bank performance in a single country or within a small group of developed economies such as the USA and the European countries. Despite its being an important economic area, there has been no comprehensive analysis of the financial performance of banks in the GCC region (Ramady, 2009;Suliman and Obaidli, 2011;Abraham, 2013;Khediri et al, 2015;Saif-Alyousfi et al, 2018a, 2018b, 2020a, 2020bAl-Harbi, 2019Buallay, 2019;Chaffai, 2019;Louhichi et al, 2019;Ousama et al, 2019;Srairi, 2019;Toumi, 2019;Al-Shboul et al, 2020;Chamberlain et al, 2020;Hassan et al, 2020;Hidayat and Sakti, 2020;Hamadi and Awdeh, 2020;Khmous and Besim, 2020;Mohammad et al, 2020;Paltrinieri et al, 2020;Saleh et al, 2020;Saif-Alyousfi, 2019, 2020a, 2020bWang and Luo, 2020). Our analysis is, therefore, the first comprehensive study on the financial performance of GCC banks.…”

Section: Introductionmentioning

confidence: 95%

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Saif‐Alyousfi

Saha

2021

IMEFM

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Purpose This paper aims to examine the effect of bank-specific, financial structure and macroeconomic factors on the risk-taking behavior, stability and profitability of banks in Gulf Cooperation Council (GCC) economies during 1998–2017. Design/methodology/approach The authors use a two-step system generalized method of moments dynamic model to analyze the data. Findings The results show that non-traditional activities increase the risk and decrease the stability and profitability of banks that are highly capitalized, highly liquid and large. Banks in this group are less engaged in securities investments and their higher degree of loan exposure leads to a decrease in risk and an increase in their stability and profitability. Higher concentration increases the risk and decreases the stability and profitability of banks that are less capitalized, less liquid and small. Banks with a higher share of non-traditional activities are riskier and less stable and less profitable before the financial crisis. The study finds that banks with relatively higher capitalization and high lending growth rates are riskier, profitable and less stable during the crisis. Larger commercial banks are less risky and more stable and profitable than smaller banks before the global financial crisis. Islamic banks performed better in terms of fee income, capitalization, liquidity, asset quality and have higher market concentration than conventional banks. Originality/value The study provides the first comprehensive empirical evidence on the drivers of risk-taking behavior, stability and profitability of the GCC banks. It also investigates the differences across these variables based on the characteristics of financial strength such as capitalization, liquidity and size; before, during and after the financial crisis; and differences between Islamic and conventional banks.

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Section: Introductionmentioning

confidence: 95%

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Saif‐Alyousfi

Saha

2021

IMEFM

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“…Model 3 explains a higher percentage of the variation in our dependent variable as shown by the increase in the R-square value. Relevant prior studies reported rather lower R -square values (Al Shboul et al, 2020;Bitar et al, 2017;Effendi, 2019;Safiullah and Shamsuddin, 2018;Zins and Weill, 2017).…”

Section: Emperical Estimationmentioning

confidence: 93%

“…Micro-level data could further validate our results. Modern literature has shown that Islamic banks are less exposed by macro uncertainty (Al Shboul et al, 2020;Belkhir et al, 2019). By employing micro-level data a comparison study between Islamic and conventional banks would reveal interesting results.…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

Oil Rent, Geopolitical Risk and Banking Sector Performance

Alsagr

Hemmen

2020

IJEEP

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This paper aims to assess and compare the impact of geopolitical risk (GPR) on the banking sector profitability of "oil and nonoil dependent" emerging markets. For empirical estimation, we used annual macro-level data of all the countries listed in the GPR index from the period 1998 to 2017. The results of the fixed effect model indicate a negative significant impact of GPR on banking sectors' profitability. Additionally, the results highlight the significant weakening moderation role of oil rent in the negative impact of GPR on the banking sector profitability. Multiple contributions arise from this study: Firstly, it explains and compares the impact of geopolitical risk on the banking sector profitability in non-oil-dependent. and oil-dependent economies. Secondly, our study sheds the light on the moderation effect of oil rent in the relationship between geopolitical risk and banking sector profitability. Indeed, the oil "curse or blessing" argument was neither revealed nor clarified in the relevant literature.

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“…Lin et al (2016) found that foreign presence improves bank efficiency, primarily in countries with high financial freedom. In a study in the Middle East and North Africa, Al-Shboul et al (2020) found that the effect of political risk on bank efficiency and stability is different for conventional and Islamic banks. Therefore, it is important to understand how changes in the political environment can affect banks' cost efficiency.…”

Section: Ii1 Civil War Political Regime Changes and Bank Performancementioning

confidence: 99%

Political Instability, Civil War and Cost Efficiency of Banking Firms: A Case Study in Sri Lanka*

Seelanatha¹

2021

Asian Economic Journal

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This paper investigates the effects of political instability resulting from successive regime changes and the 30‐year civil war on the cost efficiency of local banks in Sri Lanka. A translog cost function was used to estimate bank cost efficiency, and a multivariate regression model was used to investigate the determinants of bank cost inefficiency. On average, the cost efficiency of banks in Sri Lanka during the study period was relatively high. Sri Lankan banks performed more efficiently during the second political regime (2001–2004), which had more liberal political and economic policies to promote the private sector compared with other regimes. During this period, the government was involved in peace talks, leading to a ceasefire agreement that temporarily stopped the violence. Furthermore, the positive coefficients for the dummy variables representing the third and fourth political regimes showed that more restrictive economic policies can increase bank cost inefficiencies. The results also indicate that immediately following the civil war, Sri Lankan banks recorded a decline in cost efficiency. Cost inefficiency was positively associated with banks' risk aversion, credit risk, market share, interest rate risk and increase in GDP and negatively associated with non‐earning assets, liquidity, bank size and concentration.

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Political risk and bank stability in the Middle East and North Africa region

Cited by 65 publications

References 110 publications

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Determinants of banks’ risk-taking behavior, stability and profitability: evidence from GCC countries

Oil Rent, Geopolitical Risk and Banking Sector Performance

Political Instability, Civil War and Cost Efficiency of Banking Firms: A Case Study in Sri Lanka*

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