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

2019 ◽  
Vol 38 ◽  
pp. 310-325 ◽  
Author(s):  
Mohamed Albaity ◽  
Ray Saadaoui Mallek ◽  
Abu Hanifa Md. Noman
Keyword(s):  
Moderating Effect ◽  
Mena Region ◽  
Bank Stability ◽  
Conventional Banks

scholarly journals Financial Stability of Islamic and Conventional Banks of the MENA Region: Post and Pre-Crisis of CAMELS Framework

2020 ◽  
Vol 4 (2) ◽  
pp. 38-48
Author(s):  
Joudar Fadoua ◽  
Dinar Brahim
Keyword(s):  
Empirical Evidence ◽  
Financial Stability ◽  
Central Banks ◽  
Financial Ratios ◽  
Subprime Crisis ◽  
Mena Region ◽  
Bank Stability ◽  
Stability Measure ◽  
Conventional Banks

The present study provides new empirical evidence of bank stability measure for 12 Islamic and conventional banks in the MENA region, for a period from 2005 to 2014. The most known method of measuring bank stability is using CAMELS variables; it was adopted by multiple central banks. After calculating financial ratios for the CAMELS framework, we calculate the average for each variable for the two types of banks, for three periods: Pre-crisis 2005-2006, Subprime Crisis 2007-2008, and Post-Crisis 2009-2014, to examine the effect of the crisis on the soundness of Islamic and conventional banks.

What Drives Banking Profitability During Financial Crisis and Political Turmoil? Evidence from the MENA Region

2021 ◽  
pp. 097491012110311
Author(s):  
Salma Zaiane ◽  
Fatma Ben Moussa
Keyword(s):  
Financial Crisis ◽  
Political Instability ◽  
Generalized Method Of Moments ◽  
Bank Performance ◽  
Net Income ◽  
Mena Region ◽  
Factors Affecting ◽  
Mena Countries ◽  
Conventional Banks ◽  
The Impact

The purpose of the study is to identify bank specific, macroeconomic, and stability determinants of both conventional and Islamic bank performance. We also try to identify evidence on the impact of financial crisis and political instability during the Arab Spring (AS) period. The study covers a sample of 123 banks (34 Islamic banks and 89 conventional banks from 13 Middle East and North Africa [MENA] countries) over the period 2000–2013. We use different proxies of performance as dependent variables: return on asset (ROA), return on equity (ROE), net income margin (NIM), and estimate several regressions using the dynamic generalized method of moments. Our results reveal that bank size, asset quality, specialization, and diversification are the major bank specific factors affecting performance of Islamic and conventional banks. Besides, macroeconomic indicators (GDP and inflation) and regulatory quality influence both types of banks differently. Finally, both the financial crisis and political instability negatively affect bank performance.

Is Islamic bank profitability driven by same forces as conventional banks?

2016 ◽  
Vol 9 (1) ◽  
pp. 46-66 ◽  
Author(s):  
Hajer Zarrouk ◽  
Khoutem Ben Jedidia ◽  
Mouna Moualhi
Keyword(s):  
Dynamic Panel Data ◽  
Islamic Banking ◽  
Subprime Crisis ◽  
Islamic Banks ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Large Sample ◽  
Islamic Bank ◽  
Conventional Banks

Purpose The purpose of this paper is to ascertain whether Islamic bank profitability is driven by same forces as those driving conventional banking in the Middle East and North Africa (MENA) region. Distinguished by its principles in conformity with sharia, Islamic banking is different from conventional banking, which is likely to affect profitability. Design/methodology/approach The paper builds on a dynamic panel data model to identify the banks’ specific determinants and the macroeconomic factors influencing the profitability of a large sample of 51 Islamic banks operating in the MENA region from 1994 to 2012. The system-generalized method of moment estimators are applied. Findings The findings reveal that profitability is positively affected by banks’ cost-effectiveness, asset quality and level of capitalization. The results also indicate that non-financing activities allow Islamic banks to earn higher profits. Islamic banks perform better in environments where the gross domestic product and investment are high. There is evidence of several elements of similarities between determinants of the profitability for Islamic and conventional banks. The inflation rate, however, is negatively associated with Islamic bank profitability. Practical Implications The authors conclude that profitability determinants did not differ significantly between Islamic and conventional banks. Many factors are deemed the same in explaining the profitability of conventional as well as Islamic banks. The findings reported in the current paper might be of interest for policy makers. It is recommended to better implement non-financing activities to improve Islamic bank profitability. Originality/value Unlike the previous empirical research, this empirical investigation assesses the issue whether Islamic banks profitability is influenced by same factors as conventional model. It enriches the literature in this regard by considering the specificities of Islamic banking to identify the determinants of profitability. Moreover, this study considers a large sample (51 Islamic banks) through a different selection of countries/banks than previous studies. In addition, the period of study considers the subprime crisis insofar it ranges from 1994 to 2012. Hence, this broader study allows the authors to draw more consistent conclusions.

Assessing the bank profitability in the MENA region

2014 ◽  
Vol 7 (3) ◽  
pp. 305-332 ◽  
Author(s):  
Rim Ben Selma Mokni ◽  
Houssem Rachdi
Keyword(s):  
Method Of Moments ◽  
North Africa ◽  
Banking Sector ◽  
Middle Eastern ◽  
Generalized Method Of Moments ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Conventional Banks ◽  
Econometric Technique

Purpose – Which of the banking stream is relatively more profitable in Middle Eastern and North Africa (MENA) region? Design/methodology/approach – The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009.The authors estimate models using the generalized method of moments in system, of Blundell and Bond (1998). They exploit an up-to-date econometric technique which takes into consideration the issue of endogeneity of regressors to evaluate the comparative profitability of Islamic and conventional banks in the MENA region. Findings – Empirical analysis results show that the determinants’ significance varies between Islamic and conventional banks. Profitability seems to be quite persistent in the MENA region reflecting a higher degree of government intervention and may signal barriers to competition. Originality/value – The main interest is to develop a comprehensive model that integrates macroeconomic, industry-specific and bank-specific determinants. The paper makes comparison of the performance between two different banking systems in the MENA region. The authors consider a variable crisis to gain additional insights into the impacts of the financial crisis on MENA banking sector.

How does bank liquidity creation affect non-performing loans in the MENA region?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anas Alaoui Mdaghri
Keyword(s):  
Generalized Method Of Moments ◽  
Balance Sheet ◽  
Policy Implications ◽  
Mena Region ◽  
Policy Makers ◽  
Content Type ◽  
Mena Countries ◽  
Negative Effect ◽  
Short And Long Term ◽  
Conventional Banks

PurposeThe study aims to empirically examine the effect of bank liquidity creation on non-performing loans (NPLs) in the Middle East and North Africa (MENA) region.Design/methodology/approachBerger and Bouwman's (2009) three-step methodology was employed to calculate the level of liquidity creation of a selected sample of 111 commercial banks in ten MENA countries from 2010–2017. Next, the two-step system generalized method of moments (GMM) estimator was used to investigate the linkage between bank liquidity creation and NPLs.FindingsThe results demonstrated a significant negative effect of bank liquidity creation on NPLs in the short and long term, implying that liquidity creation through both on- and off-balance sheet activities decreases NPLs. These findings accord with the “economic-enhancing” view. Furthermore, regression analysis investigated whether this relationship remained similar for Islamic and conventional banks. The results showed that liquidity creation diminishes Islamic and conventional bank NPLs.Research limitations/implicationsThe empirical findings raise several significant policy implications. Bank liquidity creation may decrease rather than increase NPLs, although the process of liquidity creation is viewed as risky by rendering banks more illiquid. Therefore, policy-makers should encourage bank liquidity creation to stimulate the economy. In a robust economy, borrowers are more likely to repay their debts, consequently diminishing banks' NPLs.Originality/valueTo the best of the author's knowledge, the current study is the first to provide empirical evidence on the effect of bank liquidity creation on NPLs in MENA countries.

The validity of the irrelevant theory in Middle East and North African markets: conventional banks versus Islamic banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Akram Ramadan Budagaga
Keyword(s):  
Middle East ◽  
Fixed Effects ◽  
Positive Impact ◽  
Islamic Banks ◽  
Dividend Yield ◽  
Mena Region ◽  
Content Type ◽  
Mena Countries ◽  
Growth Opportunity ◽  
Conventional Banks

Purpose The purpose of this paper is to test the validity of irrelevant theory empirically by exploring the relationship between cash dividends, profitability, leverage and investment policy with the value of banking institutions in the Middle East and North Africa (MENA) markets. Design/methodology/approach The paper adopts Ohlson’s (1995) valuation model. The author estimates models by using static panel (random and fixed effects) techniques and the dynamic technique, namely, the GMM estimation. The empirical study covers a sample of 122 conventional and 37 Islamic banks listed on stock markets in 12 MENA countries over the period 1999–2018. Findings The empirical results show that dividend yield has no significant association with the value of conventional banks, whereas profitability, growth opportunity and leverage have a significant positive impact on the value of conventional banks. In contrast, the results for a sample of Islamic banks indicate that the dividend yield, profitability and leverage have a significant positive effect on the value of Islamic banks, whereas growth opportunity has no significant effect on the value of Islamic banks. Therefore, these results support, to a greater extent, the validity of the dividend irrelevance theory of Modigliani and Miller for conventional banks but would not be accepted for Islamic banks in the MENA region. Research limitations/implications This study is restricted to a sample of one type of financial firms, banking firms listed in the MENA countries. In addition, the study has dealt with one type of dividend (the cash dividend). Practical implications Highlighting the difference between conventional and Islamic banks is crucial to understanding dividend policy behavior and to providing investors information to be integrated in their valuation setting to make informed corporate decisions. Originality/value To the best of the author’s knowledge, the present study is the first of its kind that it draws a comparative analysis by testing empirically the validity of the Irrelevant Theory to banks in the MENA region covering a long time period in the recent past.

Impact of general trust on bank risk-taking: the moderating effect of confidence in banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Heba Masoud ◽  
Mohamed Albaity
Keyword(s):  
Risk Taking ◽  
Developing Economies ◽  
Negative Relationship ◽  
Developed Countries ◽  
Moderating Effect ◽  
Bank Risk ◽  
World Value Survey ◽  
Mena Region ◽  
Content Type ◽  
General Trust

PurposeThis study examines the effect of general trust (GT) and confidence in banks (CIB) on bank risk-taking. Besides, it explores the moderating role of CIB on the relationship between GT and bank risk-taking.Design/methodology/approachSecondary data was obtained from the World Value Survey, World Bank and BankFocus from 2011 to 2018. Two-step system GMM estimator was used to examine the links between the GT and CIB with bank risk-taking in MENA region.FindingsResults indicated that both GT and CIB negatively influenced bank risk-taking. Moreover, CIB weakened the negative relationship between GT and bank risk-taking. However, the results were different for MENA region as compared to the full sample.Originality/valueThe studies on the link between trust and bank risk-taking are either carried out on an international sample or using a developed economies sample. However, the authors believe that developing economies might exhibit different relationships due to cultural and structural differences present in developed countries. Besides, the authors believe that testing the moderating effect of CIB could shed more light on the differences between developing and developed countries.

Bank risk-taking in the MENA region

2016 ◽  
Vol 43 (12) ◽  
pp. 1367-1385 ◽  
Author(s):  
Rim Ben Selma Mokni ◽  
Mohamed Tahar Rajhi ◽  
Houssem Rachdi
Keyword(s):  
Risk Taking ◽  
Random Effect ◽  
Generalized Method Of Moments ◽  
Least Square ◽  
Islamic Banks ◽  
Mena Region ◽  
Content Type ◽  
Conventional Banks ◽  
Macroeconomic Determinants ◽  
The Empirical Analysis

Purpose The purpose of this paper is to investigate determinants of risk-taking in Islamic banks and conventional banks located in the MENA region. Design/methodology/approach The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009. The authors estimate models using both generalized least square random effect and generalized method of moments system approaches. Findings The results of the empirical analysis show that the determinants’ risk-taking significance varies between Islamic and conventional banks. Originality/value The main aim is to develop a comprehensive model that integrates macroeconomic determinants, industry-specific determinants, and bank-specific determinants. This paper performs a comparison of the risk-taking between two different banking systems in the MENA region.

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