Bank risk and performance in the MENA region: The importance of capital requirements

Bitar, Mohammad; Saad, Wadad; Benlemlih, Mohammed; O'brien, David

Abstract

This paper benefits from various risk-and non-risk-based regulatory capital ratios and examines their impact on bank risk and performance in the Middle East and North Africa (MENA) region. Our findings suggest that compliance with Basel capital requirements enhances bank protection against risk, and improves efficiency and profitability. The impact of capital requirements on bank performance is more pronounced for too-big-to-fail banks, banks in periods of crises and banks in countries with good governance. The results are also robust when controlling for the Arab Spring transition period. Finally, endogeneity checks, alternative risk and performance measures, a principal component analysis and other estimation techniques confirm findings. JEL classification: G21, G28, G32, P5.

Citation

Bitar, M., Saad, W., Benlemlih, M., & O'brien, D. (2016). Bank risk and performance in the MENA region: The importance of capital requirements. Economic Systems, 40(3), 397-421. https://doi.org/10.1016/j.ecosys.2015.12.001

• Journal Article Type: Article
• Acceptance Date: Dec 17, 2015
• Online Publication Date: Jun 27, 2016
• Publication Date: 2016-09
• Deposit Date: Oct 9, 2019
• Publicly Available Date: Jan 24, 2020
• Print ISSN: 0939-3625
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 40
• Issue: 3
• Pages: 397-421
• DOI: https://doi.org/10.1016/j.ecosys.2015.12.001
• Keywords: Basel capital; too-big-to-fail; Arab Spring; risk; efficiency; profitability
• Public URL: https://nottingham-repository.worktribe.com/output/2792141
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0939362516300504