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The Impact of Bank Capital and Institutional Quality on Lending: Empirical Evidence from the MENA Region

Author

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  • Maya El Hourani

    (Université Côte d'Azur, France
    GREDEG CNRS)

  • Gérard Mondello

    (Université Côte d'Azur, France
    GREDEG CNRS)

Abstract

This paper aims to investigate the influence of bank capitalization and institutional quality on the lending activity of commercial banks in the MENA region over the period from 2000 to 2016. By applying the fixed effect panel data estimator, we find that, commercial bank lending depends on bank-specific variables, macroeconomic variables and the institutional environment. Our results show that any increase in bank capitalization and the implementation of capital regulation (Basel II and Basel III) have negative impacts on the credit supply. We find, also, that political stability and good regulatory quality encourage foreign, domestic and private banks to improve their credit supply. However, commercial banks tend to behave cautiously when there is increasing government effectiveness and financial freedom.

Suggested Citation

  • Maya El Hourani & Gérard Mondello, 2019. "The Impact of Bank Capital and Institutional Quality on Lending: Empirical Evidence from the MENA Region," GREDEG Working Papers 2019-34, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2019-34
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    Cited by:

    1. Ibrahim Khalil ALLOUCHE & Nancy HIJAZI, 2024. "Financial Stability in the MENA Region: The Impact of Banking Capitalization and Institutional Environment on Credit Availability," International Business Research, Canadian Center of Science and Education, vol. 17(1), pages 1-1, February.
    2. Florentina Melnic & Daniel Juravle, 2020. "Governance And Access To Finance," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 25, pages 151-168, June.
    3. Ali Awdeh & Chawki EL-Moussawi, 2021. "Capital requirements, institutional quality and credit crunch in the MENA region," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(8), pages 1909-1925, January.

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    Bank capital; institutional quality; credit supply; MENA region;
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