Competition and bank stability in the MENA region: The moderating effect of Islamic versus conventional banks

By Mohamed Albaity, R. Mallek, A. Noman. Emerging Markets Review, 2019

184 citations recorded by the source corpus.

Abstract This paper investigates the impact of competition on bank stability using data from 276 banks across eighteen MENA countries between 2006–2015. We controlled for financial inclusion, productivity, and macroeconomic instability in addition to several different control variables, including bank size, efficiency, diversification and leverage. The two-step system GMM suggested that banks facing little competition tended to take less insolvency and credit risks and enjoy more profitability. Furthermore, we found that the competition-fragility effect is more prominent for Islamic banks than conventional ones in MENA countries. This study contains some significant policy implications for regulators looking to improve bank stability.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/875df767bb8c8975f77527153ad5c90e001c37b6