Ownership, regulation and bank risk-taking: evidence from the Middle East and North Africa (MENA) region

2019 ◽  
Vol 19 (1) ◽  
pp. 23-43 ◽  
Author(s):  
Faizul Haque
Keyword(s):  
Middle East ◽  
North Africa ◽  
Risk Taking ◽  
Regulatory Reform ◽  
Basel Ii ◽  
Ownership Concentration ◽  
Set Covering ◽  
Bank Risk ◽  
Content Type ◽  
Mena Countries

Purpose This study aims to investigate how ownership structure and bank regulations individually and interactively influence risk-taking behaviour of a bank. Design/methodology/approach This empirical framework is based on dynamic two-step system generalised method of moments estimation technique to analyse an unbalanced panel data set covering 144 conventional banks from 12 Middle East and North Africa (MENA) countries. Findings The estimation results suggest that foreign shareholding has an inverse relationship with bank risk-taking. In addition, official supervisory power is found to have a positive association with bank risk, and this relationship is reinforced for banks with higher ownership concentration. In addition, capital stringency increases bank risk, whereas market discipline has an opposite effect, only in countries with higher activity restrictions. Finally, the interaction between ownership concentration and activity restriction has an inverse association with bank risk-taking. Research limitations/implications Overall, the evidence suggests that the Basel II framework and the regulatory reform initiatives in the post-global financial crisis period do not seem to have reduced bank risk-taking in MENA countries. Originality/value This study contributes to the literature on the effectiveness of regulatory reform based on the three pillars of the Basel II guidance (capital regulations, market-oriented disclosures and official supervisory power), and offers evidence in support of “political/regulatory capture hypothesis” of bank regulation. The results also provide support for “global advantage hypothesis” of bank ownership.

scholarly journals How corporate governance and ownership affect banks’ risk-taking in the MENA countries?

2019 ◽  
Vol 29 (2) ◽  
pp. 182-198
Author(s):  
Luis Otero ◽  
Rafat Alaraj ◽  
Ruben Lado-Sestayo
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Good Governance ◽  
Dynamic Panel Data ◽  
Set Covering ◽  
North African ◽  
Data Set ◽  
Content Type ◽  
Mena Countries ◽  
The Relationship

Purpose The purpose of this paper is to explore the relationship between corporate governance and risk-taking behaviour of banks operating in the Middle East and North African (MENA) countries. Design/methodology/approach In doing so, the authors use a data set covering 165 banks located in 13 MENA countries over the period 2005–2012 and apply dynamic panel data methodology. Findings The results show that good governance acting in the interests of shareholders could lead to excessive risk taking; in this sense, a conflict of interest between the stakeholders, interested in the solvency of the financial system, and shareholders, trying to maximise their benefit, may occur. The greater risk can be reinforced by the governance of the country and a strong macro governance framework can incentivise a higher risk exposure in banks, showing the influence of bank regulation and law enforcement on the risks taken by banks. Originality/value To the best of the authors’ knowledge, this is the first paper showing that corporate governance is relevant for explaining risk taking at the country and bank levels in MENA countries.

Capital buffers in Middle East and North Africa (MENA) banks: is market discipline important?

2017 ◽  
Vol 10 (2) ◽  
pp. 208-228 ◽  
Author(s):  
Saibal Ghosh
Keyword(s):  
Middle East ◽  
North Africa ◽  
Global Financial Crisis ◽  
Dynamic Panel Data ◽  
Market Discipline ◽  
Bank Capital ◽  
Content Type ◽  
Mena Countries ◽  
Using Data ◽  
The Global Financial Crisis

Purpose The role of market discipline in influencing capital buffers has been debated in literature. Limited evidence on this score is available for Middle East and North Africa (MENA) countries. In this context, using data for 2001-2012, the paper aims to examine the role and relevance of market discipline in affecting capital buffer for MENA banks. Design/methodology/approach Given the longitudinal nature of the data, the paper employs dynamic panel data techniques that take on board the potential endogeneity between the dependent and independent variables. Findings The analysis indicates that the disciplining effect of depositors in MENA banks on capital buffer occurs primarily through the quantity channel, although this behaviour differs for banks with high versus those with low buffers. In particular, bigger banks which typically have thin capital cushion are much less subject to market discipline, presumably owing to their too-big-to-fail status. Originality/value The analysis differs from the extant literature in three distinct ways. First, the paper examines the differential response of Islamic banks on capital buffers via market discipline. Second, several of these countries are primarily commodity exporters. Accordingly, the paper examines the behaviour of these countries with regard to market discipline. Third, how far did the global financial crisis impact bank capital buffer had not been explored in prior empirical research, an aspect that is addressed in this study.

Ownership, risk-taking and performance of banks in emerging economies

2016 ◽  
Vol 8 (3) ◽  
pp. 282-297 ◽  
Author(s):  
Faizul Haque ◽  
Rehnuma Shahid
Keyword(s):  
Emerging Economies ◽  
Risk Taking ◽  
Default Risk ◽  
Set Covering ◽  
Bank Risk ◽  
Data Set ◽  
Content Type ◽  
Study Results ◽  
And Performance ◽  
The Impact

Purpose This paper examines the effect of ownership structure on bank risk-taking and performance in emerging economies by using India as a case study. Design/methodology/approach We use generalised method of moments (GMM) estimation technique to analyse an unbalanced panel data set covering 217 bank-year observations from 2008 to 2011. Findings Overall, our study results suggest that government ownership is positively associated with default risk and negatively related to bank profitability. Interestingly, we find foreign ownership having a positive effect on default risk and a negative effect on profitability among the listed commercial banks. The effect of ownership concentration on bank risk-taking and profitability appears to be statistically insignificant. Originality/value This study is among the first to consider the impact of ownership on bank risk-taking and profitability from an emerging economy perspective. It also addresses the problem of endogenous relationships among ownership, risk-taking and performance of a bank. This study is likely to have implications for policymakers in undertaking regulatory reforms relating to ownership, risk management and banking sector stability.

Corporate governance reforms and bank performance: evidence from the Middle East and North Africa

2017 ◽  
Vol 17 (5) ◽  
pp. 822-844 ◽  
Author(s):  
Saibal Ghosh
Keyword(s):  
Corporate Governance ◽  
Middle East ◽  
North Africa ◽  
Operating Efficiency ◽  
Bank Performance ◽  
Content Type ◽  
Mena Countries ◽  
The Impact ◽  
Corporate Governance Reforms ◽  
Governance Reforms

Purpose The purpose of the study is to understand the importance of corporate governance reforms for the Middle East and North Africa (MENA) country banks. To address this issue, the author combines the staggered timing of corporate governance reforms for banks across MENA countries with bank-level data for the period 2000-2012 and examine the impact on bank performance. Design/methodology/approach The author employs fixed effects regression within a difference-in-differences specification for the analysis. Findings The analysis suggests that not all governance characteristics are equally effective and some of these characteristics exert a more pronounced effect on bank performance as compared to others. These results also vary across oil-exporting and -importing nations and differ during the crisis. Besides, the authors find that improved operating efficiency and access to finance are the key channels through which governance improves bank performance. Practical implications Corporate governance reforms in the MENA countries need to be carefully tailored, taking into account the inherent economic characteristics of the country for it to exert durable impact. The challenge for policymakers is to find the right balance that can ensure maximum benefits for the banking sector, while minimizing the challenges involved in its implementation. Originality/value To the best of the authors’ knowledge, this is one of the earliest studies for MENA country banks to examine the interface between corporate governance reforms and bank performance, while controlling for the possible endogeneity of such reforms on performance.

Party systems and ideological cleavages in the Middle East and North Africa

2020 ◽  
pp. 135406881989429
Author(s):  
Abdullah Aydogan
Keyword(s):  
Middle East ◽  
North Africa ◽  
Political Party ◽  
Party Systems ◽  
Party Competition ◽  
Right Wing ◽  
Left Wing ◽  
Mena Region ◽  
Quantitative Evidence ◽  
Mena Countries

Previous studies have contrasted the political party systems in the Middle East and North Africa (MENA) with those in more democratic countries, raising three important points: (1) the religious–secular dimension, rather than the economic or social left–right, explains the underlying political party competition; (2) left-wing politics is relatively weaker than right-wing politics; and (3) parties that are traditionally known as rightist take left-leaning positions on numerous issue dimensions, and vice versa. Even though this particular literature on party politics in the MENA has greatly improved our understanding of political dynamics in the region, these studies have either lacked quantitative evidence to support these points or their evidence was limited to single-country cases. This study aims to address this issue by analyzing original expert survey data of the ideological positions of political parties in the MENA region. Results show that in addition to the religious–secular dimension, the economic left–right divide and the pace of political reforms are highly important dimensions. The study also provides numerous examples showing that the policy stances of leftist and rightist parties are significantly reversed when MENA countries are compared with more developed democracies.

Food security in selected Middle East and North Africa (MENA) countries: an inter-country comparison

Food Security ◽  
2019 ◽  
Vol 11 (3) ◽  
pp. 531-540 ◽  
Author(s):  
Nasrin Omidvar ◽  
Davod Ahmadi ◽  
Kate Sinclair ◽  
Hugo Melgar-Quiñonez
Keyword(s):  
Food Security ◽  
Middle East ◽  
North Africa ◽  
Mena Countries ◽  
Country Comparison

China and the Revolutions in the Middle East and North Africa

2011 ◽  
Vol 3 (1-2) ◽  
pp. 192-203 ◽  
Author(s):  
Randall Peerenboom
Keyword(s):  
Social Justice ◽  
Middle East ◽  
North Africa ◽  
Authoritarian Regimes ◽  
Northern Africa ◽  
Mena Countries ◽  
Turn On ◽  
Potential Sources ◽  
The Government

The 2011 revolutions in the Middle East and Northern Africa (MENA) led to considerable hope for some people that China would experience a similar political uprising, as well as considerable anxiety for the ruling regime. The government’s immediate response was to downplay the risk of a similar event occurring in China by distinguishing between China and MENA, while at the same time cracking down on activists and other potential sources of instability—including attempts to organize popular revolutionary protests in China. Although the government has so far managed to avoid a similar uprising, neither response has been entirely successful. Despite a number of significant diff erences between China and MENA countries, there are enough commonalities to justify concerns about political instability. Moreover, relying on repression alone is not a long-term solution to the justified demands of Chinese citizens for political reforms and social justice. Whether China will ultimately be able to avoid the fate of authoritarian regimes in MENA countries will turn on its ability to overcome a series of structural challenges while preventing sudden and unpredictable events, like those that gave rise to the Arab revolutions, from spinning out of control.

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