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.

Depositor discipline, financial crisis and macroprudential policies

2020 ◽  
Vol 11 (8) ◽  
pp. 1531-1553
Author(s):  
Saibal Ghosh
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Dynamic Panel Data ◽  
Market Discipline ◽  
Content Type ◽  
Mena Countries ◽  
Macroprudential Policies ◽  
Level Data ◽  
Depositor Discipline ◽  
The Global Financial Crisis

Purpose Using bank-level data on MENA countries during 2000-2016, this study aims to examine the role and relevance of macroprudential policies in affecting depositor discipline. Design/methodology/approach The author uses the dynamic panel data methodology as compared to alternate techniques, owing to the ability of this technique to effectively address the endogeneity problem of some of the independent variables. Findings The findings suggest that market discipline for MENA banks occurs primarily through deposit rates. During the crisis, depositors typically focus on a catch-all measure of bank performance. Second, macroprudential policies play a role in influencing market discipline. Third, the behavior of depositors in exercising market discipline is more pronounced in countries with high Islamic banking share and works mainly through the price channel. Originality/value To the best of author’s knowledge, this is one of the early studies for MENA countries to examine this issue in a systematic manner. By focusing on an extended sample of MENA country banks covering an extensive period that subsumes the global financial crisis, author’s analysis is able to shed light on the relevance of macroprudential policies in affecting depositor discipline.

The 2008–2009 global financial crisis and the cost of debt capital among SMEs: Swedish evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Darush Yazdanfar ◽  
Peter Öhman
Keyword(s):  
Financial Crisis ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Dynamic Panel Data ◽  
Cost Of Debt ◽  
Cross Sectional ◽  
Content Type ◽  
Debt Capital ◽  
Using Data ◽  
The Cost

PurposeThe main purpose of this study is to describe and analyse the relationship between the 2008–2009 global financial crisis and small and medium-sized enterprises' cost of debt capital.Design/methodology/approachStatistical methods, including multiple OLS and dynamic panel data, were used to analyse a longitudinal cross-sectional panel dataset of 3865 Swedish SMEs operating in five industry sectors over the 2008–2015 period.FindingsThe results suggest that the cost of debt was influenced by the financial crisis and another macroeconomic factor, i.e. the interbank interest rate, and by firm-specific factors such as firm size and lagged cost of debt.Originality/valueTo the authors' best knowledge, this is one of few studies to examine the cost of debt among SMEs during the crisis and post-crisis periods using data from a large-scale, longitudinal, cross-sectional database.

Determinants of banks’ dividend payment decisions: evidence from MENA countries

2020 ◽  
Vol 13 (5) ◽  
pp. 847-871
Author(s):  
Akram Ramadan Budagaga
Keyword(s):  
Emerging Markets ◽  
Commercial Banks ◽  
Dividend Policy ◽  
Global Financial Crisis ◽  
Mena Region ◽  
Dividend Payment ◽  
Content Type ◽  
Factors Affecting ◽  
Mena Countries ◽  
The Global Financial Crisis

Purpose This paper aims to investigate bank-specific determinants affecting the dividend policy of commercial banks listed in the Middle East and North Africa (MENA) region countries. Design/methodology/approach The study uses pooled and panel tobit and logit regression analyses based on 16-year unbalanced data with 1,593 firm-year observations collecting from 117 commercial banks listed in 11 MENA countries. Findings The results indicated that the main bank-specific factors affecting dividend payment decisions are bank size, profitability, capital adequacy, credit risk and bank age in the context of the MENA emerging markets. In addition, the analysis showed that the yearly dummy for the global financial crisis (2008–2009) has a significant negative effect, while the yearly dummy for the Arabic spring crisis (2010–2011) has no significant effect on the dividend payment decision of banks listed in the MENA region. Furthermore, the growth opportunity is not one of the key factors affecting dividend policies by banks in MENA emerging markets. Considering this information, it is reasonable to conclude that MENA region banks’ dividend decisions follow investment decisions. In other words, the dividend decisions and investment decisions are independent of each other. The findings support theories (hypotheses) of dividends such as residual, signalling, regulatory pressures, transaction cost and lifecycle. Research limitations/implications This study is restricted to a sample of one type of financial firm, conventional commercial banks listed in the MENA markets because of the problem of missing data and limited information on other financial firms for the same period, particularly Islamic banks. Moreover, the focus of this study was on factors that are considered bank fundamentals. However, ownership variables were not included in the study because of unavailability. Practical implications The results of this study have several important implications for banks’ dividend policymakers, regulators, analysts and investors. Dividend policymakers in MENA emerging markets seem to use residual dividend policy, in which they distribute dividends according to what is left over after all acceptable investment opportunities have been undertaken. These inconsistent, unstable dividend policy trends make it difficult for investors to predict future dividend decisions. Further, this practise may convey information to shareholders about a lack of positive future investment opportunities. This may negatively affect the share value of banks. Acquiring a broad understanding of the dividend behaviour of MENA banks enables regulators to take more effective regulatory actions to protect shareholders and depositors. Finally, the results of this study can help analysts and investors build their dividends predictions and investment strategies. Originality/value The banking sector plays a disproportionately large role in the development of emerging economies. Therefore, this study is one of the first to examine a large cross-country sample of MENA banks (117) for an extensive period (2000–2015). The study includes both the Global financial crisis and Arab uprising periods, including after the liberalization and recent economic reforms and structural changes in financial sectors across MENA countries.

scholarly journals Does Going Tough on Banks Make the Going Get Tough? Bank Liquidity Regulations, Capital Requirements, and Sectoral Activity

2020 ◽  
Vol 20 (103) ◽  
Author(s):  
Deniz Igan ◽  
Ali Mirzaei
Keyword(s):  
Global Financial Crisis ◽  
Emerging Market ◽  
Capital Requirements ◽  
Bank Capital ◽  
External Finance ◽  
Capital Ratios ◽  
Investment Rates ◽  
Cross Country ◽  
Using Data ◽  
The Global Financial Crisis

Whether and to what extent tougher bank regulation weighs on economic growth is an open empirical question. Using data from 28 manufacturing industries in 50 countries, we explore the extent to which cross-country differences in bank liquidity and capital levels were related to differences in sectoral activity around the period of the global financial crisis. We find that industries which are more dependent on external finance, in countries where banks had higher liquidity and capital ratios, performed relatively better during the crisis, with regard to investment rates and the creation of new enterprises. This relationship, however, exists only for bank-based systems and emerging market economies. In the pre-crisis period, we find only a marginal link to bank capital. These findings survive a battery of robustness checks and provide some solid support for the tighter prudential measures introduced under Basel III.

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.

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.

scholarly journals Bank regulation and stock market stability across countries

2016 ◽  
Vol 24 (4) ◽  
pp. 402-419
Author(s):  
Walaa Wahid ElKelish ◽  
Jon Tucker
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Regulation ◽  
Global Financial Crisis ◽  
Bank Capital ◽  
Least Squares Regression ◽  
Content Type ◽  
Market Stability ◽  
The Global Financial Crisis ◽  
The Impact

Purpose The purpose of this paper is to investigate whether bank capital strength and external auditing requirements influenced international stock market stability during the 2007/2008 global financial crisis. Design/methodology/approach Bank mandatory regulation data are obtained from the World Bank database, while stock market stability is gauged for 385 listed banks across 43 countries by means of generalised least squares regression models. Findings The authors find that mandatory capital strength requirements and the existence of mandatory audit increase stock market stability across countries. Further, more profitable banks increase stock market stability. The results are robust to both country institutional settings and economic freedom characteristics. Originality/value This paper provides evidence of the impact of bank regulations on stock market stability during the global financial crisis, thereby providing a useful insight for stakeholders to enhance financial regulation and policy.

Financial distress determinants among SMEs: empirical evidence from Sweden

2020 ◽  
Vol 47 (3) ◽  
pp. 547-560 ◽  
Author(s):  
Darush Yazdanfar ◽  
Peter Öhman
Keyword(s):  
Financial Crisis ◽  
Financial Distress ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Binary Logistic Regression ◽  
Data Availability ◽  
Cross Sectional ◽  
Data Set ◽  
Content Type ◽  
The Global Financial Crisis

PurposeThe purpose of this study is to empirically investigate determinants of financial distress among small and medium-sized enterprises (SMEs) during the global financial crisis and post-crisis periods.Design/methodology/approachSeveral statistical methods, including multiple binary logistic regression, were used to analyse a longitudinal cross-sectional panel data set of 3,865 Swedish SMEs operating in five industries over the 2008–2015 period.FindingsThe results suggest that financial distress is influenced by macroeconomic conditions (i.e. the global financial crisis) and, in particular, by various firm-specific characteristics (i.e. performance, financial leverage and financial distress in previous year). However, firm size and industry affiliation have no significant relationship with financial distress.Research limitationsDue to data availability, this study is limited to a sample of Swedish SMEs in five industries covering eight years. Further research could examine the generalizability of these findings by investigating other firms operating in other industries and other countries.Originality/valueThis study is the first to examine determinants of financial distress among SMEs operating in Sweden using data from a large-scale longitudinal cross-sectional database.

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.

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