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Competition, cost efficiency and stability of banks in the MENA region

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  • El Moussawi, Chawki
  • Mansour, Rana

Abstract

The objective of this paper is to study the relationship between competition, cost efficiency, and bank stability for a sample of 222 commercial banks operating in the Middle East and North Africa (MENA) region over the period 1999–2018. The results obtained by the system Generalized Method of Moments (GMM) show that competition positively affects both the cost efficiency and stability of the banks in our sample, where competition is measured by the Panzar-Rosse H-statistic and alternatively by the Lerner index. Moreover, the results reveal the existence of a significant relationship between most bank-specific, macroeconomic and institutional factors and the cost efficiency and stability of banks. The robustness checks prove that the ownership structure of banks is an important determinant of banking stability and detect a nonlinear relationship between competition and banking stability. These results imply that banking regulatory policies in MENA countries should be careful not to over-consolidate the sector at the detriment of both efficiency and stability.

Suggested Citation

  • El Moussawi, Chawki & Mansour, Rana, 2022. "Competition, cost efficiency and stability of banks in the MENA region," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 143-170.
    • Handle: RePEc:eee:quaeco:v:84:y:2022:i:c:p:143-170
    DOI: 10.1016/j.qref.2021.12.005
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    1. Muzammal Khan & Dr. Muhammad Sajid Amin, 2023. "Does market competition contribute to the banking stability of South Asian emerging economies?," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(4), pages 119-125.
    2. Wajahat Azmi & Zaheer Anwer & Mohsin Ali & Shamsher Mohamad, 2024. "Competition, stability, and institutional environment: The case of dual banking economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 609-631, January.

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