Work

Diversification and bank stability in the MENA region

Year: 2023

Type: article

Abstract: Both regulators and policymakers are now very interested on the hazy relationship between diversification (income, asset, and fund) and bank stability, which remains elusive. This is also unknown how the diversification affects the stability of financial organizations. This study focuses on diversification, country governance index, bank profitability, and its effect on the stability of banks. With the study period of the dataset from 2012 to 2021, a fixed-effect panel data regression analysis is conducted utilizing a collection of 10 MENA countries: Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Sudan, Turkey, and the United Arab Emirates. The study reveals that asset and fund diversification may have a negative impact on bank stability, while income diversification may lead to greater stability. Additionally, the research suggests that a stronger country governance index and higher net interest margin are linked to increased bank stability in the 10 MENA countries analyzed. In summary, stronger governance and profitability can contribute to the overall stability of the banking sector in these regions.

Source: Social Sciences & Humanities Open

DOI: 10.1016/j.ssaho.2023.100520

Authors: Ahanaf Shahriar, Saima Mehzabin, Md Abul Kalam Azad

Institution: Islamic University of Technology

Language: English

Topic: Banking stability, regulation, efficiency

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $825