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The Nexus of Competition, Loan Quality, and Ownership Structure for Risk-Taking Behaviour

Author

Listed:
  • Syed Moudud-Ul-Huq

    (Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail 1902, Bangladesh)

  • Md. Abdul Halim

    (Institute for Advanced Research, United International University, Dhaka 1212, Bangladesh
    Department of Business Administration, Institute of Science Trade and Technology, Dhaka 1216, Bangladesh
    Department of Business Administration, Mawlana Bhashani Science and Technology University, Santosh, Tangail 1902, Bangladesh)

  • Farid Ahammad Sobhani

    (School of Business and Economics, United International University, Dhaka 1212, Bangladesh)

  • Ziaul Karim

    (School of Business and Economics, United International University, Dhaka 1212, Bangladesh)

  • Zinnatun Nesa

    (School of Business and Economics, United International University, Dhaka 1212, Bangladesh)

Abstract

“The core purpose is to explore the relationship between competition, loan quality, ownership structure, and risk for MENA economies.” In addition, this study examines the financial stability level of dual banking and explores the bidirectional causality of competition and risk concerning the impact of ownership structure. This study uses 748 observations from 2011 to 2020 in MENA countries. The Generalized Method of Moments (GMM) is an econometric technique used to estimate the parameters of a statistical model. The study findings indicate a negative (positive) relationship between MENA bank competition and risk (financial stability). It indicates that lower bank competition reduces bank credit risk and increases financial stability in MENA countries. Regarding ownership structure, Islamic banks display a stronger position in MENA economies than that of Commercial banks and Specialized Government Institutions. In contrast, specialized government institutions are riskier than commercial banks and Islamic banks. Loan quality shows the two-way causality between the degree to which banks compete and the quality of their loans to customers in the MENA markets. This study sets itself apart from other studies by creating a new segmented literature review portion. Finally, a significant policy implication is provided for academics, researchers, and policymakers interested in applying these findings.

Suggested Citation

  • Syed Moudud-Ul-Huq & Md. Abdul Halim & Farid Ahammad Sobhani & Ziaul Karim & Zinnatun Nesa, 2023. "The Nexus of Competition, Loan Quality, and Ownership Structure for Risk-Taking Behaviour," Risks, MDPI, vol. 11(4), pages 1-22, March.
    • Handle: RePEc:gam:jrisks:v:11:y:2023:i:4:p:68-:d:1110362
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    References listed on IDEAS

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    Cited by:

    1. Md Mohiuddin Chowdhury & Changjun Zheng & Anupam Das Gupta & Atta Ullah, 2024. "Competition's Effect: Unveiling the Simultaneous Relationship between Risk and Cost of Financial Intermediation," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 14(5), pages 1-4.

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