Competition and bank stability in the MENA region: The moderating effect of Islamic versus conventional banks |
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| Institution: | 1. Department of Finance and Economics, College of Business Administration, University of Sharjah, United Arab Emirates;2. Department of Finance and Banking, Faculty of Business and accountancy, University of Malaya, Kuala Lumpur, Malaysia;3. Department of Business Administration, Faculty of Business Studies, International Islamic University Chittagong, Bangladesh |
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| 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. |
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