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

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  • Bitar, Mohammad
  • Saad, Wadad
  • Benlemlih, Mohammed

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 the 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 crisis 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 our findings.

Suggested Citation

  • Bitar, Mohammad & Saad, Wadad & Benlemlih, Mohammed, 2016. "Bank risk and performance in the MENA region: The importance of capital requirements," Economic Systems, Elsevier, vol. 40(3), pages 398-421.
    • Handle: RePEc:eee:ecosys:v:40:y:2016:i:3:p:398-421
    DOI: 10.1016/j.ecosys.2015.12.001
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    More about this item

    Keywords

    Basel capital; Too-big-to-fail; Arab Spring; Risk; Efficiency; Profitability;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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