Banking Competition, Market Structure and Financial Stability of the Gulf Cooperation Council Region (original) (raw)
The Competition and Market Structure in the Saudi Arabia Banking
The purpose of this paper is twofold: to investigate the market structure of Saudi Arabia banking industry; and to evaluate the monopoly power of banks during the years 1993-2006. Design/methodology/approach – The paper is examining the market structure using the most frequently applied measures of concentration k-bank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI) and it is evaluating the monopoly power of banks using the “H-statistic” by Panzar and Rosse.
Emerging Markets Review, 2019
This paper investigates the impact of competition on bank stability using data from 276 banks across eighteen MENA countries between 2006-2015. We controlled for financial inclusion, productivity, and macroeconomic instability in addition to several different control variables, including bank size, efficiency, diversification and leverage. The two-step system GMM suggested that banks facing little competition tended to take less insolvency and credit risks and enjoy more profitability. Furthermore, we found that the competition-fragility effect is more prominent for Islamic banks than conventional ones in MENA countries. This study contains some significant policy implications for regulators looking to improve bank stability.
Concentration and Competition in Oman‟s Banking Sector: Implications for Financial Stability
Both the country experiences and the academic debate suggest that concentration and competition have ambiguous effects on financial stability and as such, there is no clear conclusion on the validity of either the competition-stability or the competition-fragility hypotheses. However, it would not be entirely correct to either conclude that these two different strands of the literature yield opposing predictions regarding the effects of competition and market power on banking stability. The visible "trade-off" needs to be addressed by suitable revisit of the "binding constraint" which in this case could be the regulatory competition policy. The standard response to conflicting theoretical predictions is to let the data speak and that is what was done for Oman in this paper.
Banking Competition and Efficiency in Jordan: A Note
International Journal of Banking and Finance, 2013
The financial economics literature contains numerous research papers which examine issues that concern the banking industry. One of these issues is banking competition. Indeed, this issue is important because of its implications to financial stability and the growth of the borrowing firms. The purpose of this paper is to assess the competitive behavior of the Jordanian banking sector during the period ranging from 1999 to 2008 using the nonstructural test developed by Panzar and Rosse. In more specific terms, this paper examines the overall competitive condition during the period 1999-2008 and how it has evolved over time. Based on the empirical findings, it is expected that a number of policy recommendations may be provided. The objective of these recommendations is to enhance the regulation of the banking sector in Jordan and improve their performance.
The banks' performance in Gulf
Only a few crosscountry empirical studies have been conducted to measure the performance of commercial banks especially before, during, and after crises (financial or political). This study makes an attempt to fill the gap in literature by investigating the impacts of crises on Gulf corporate conceal (GCC) commercial banks performance over the period between1997-2007. The rationale behind this selection is: i) the GCC countries within this period are witnessed two major crises; the political crisis (second Gulf war) and the financial crisis (current global crisis). Hence, it is important for the manager to recognize the best bank policy under each crisis that could help both bankers and regulators in how to manage these crises; ii) Banking system within GCC countries are comprise of two different operating banking systems; Islamic and Conventional. As both are operating in similar environments, it is of interest to examine whether, one can make judgments concerning the success of their competitive strategies and other management-determined factors by using performance measures. Two different evaluation methods are computed to measure bank performance; data envelopment analysis (DEA) and classification and regression tree (CART). The overall result shows that Conventional banks perform well during political crisis, whereas, Islamic banks perform better during the financial crisis. However, this differences is not statistical significant, which means that GCC commercial banks can be equally competitive when it comes to technical efficiency. Also, there is no statistically significant relationship between bank geographical location and it is efficiency score. Moreover, the results confirm that large and small size GCC commercial banks are more efficient than the medium size. Out of the 24 environmental factors included in the study to investigate the relationship between environmental factors (internal and external) and bank performance; only 15 factors are considered to be important in predicating the fully efficient banks.
Islamic Banks and Financial Stability: An Empirical Analysis of the Gulf Countries
The recent financial crisis of 2007-2008 is a good experiment to test the difference between the Islamic and the conventional model in terms of stability and banking risk. Using Z-score as an indicator of banking stability, our regression analysis (covers a matched sample of 136 banks from the Gulf countries in which (50) banks are Islamic and (86) are conventional between 2003 and 2012. Up to now, we have obtained the following results: small Islamic banks tend to be financially more stable than small conventional ones, large conventional banks tend to be financially more stable than large Islamic banks, and small Islamic banks tend to be financially stronger than large Islamic banks. Empirical results also show that conventional banks were most affected by the financial crisis. Similarly, analyzing the impact of Islamic banks on financial stability by studying the effect of market share in terms of credit supply, the empirical results show that the increase in market share in terms of the offering of loans by Islamic banks negatively affects financial stability, and thus leads to the increase of market share in terms of credit supply for conventional banks improving financial stability.
Analysis of UAE Banking Sector
2018
The paper aims to give an overview of the banking sector of the United Arab Emirates. The paper aims to give give information about the importance of the sector, the major changes that have been made and are planned for future by the Central Bank of UAE, the performance and efficiency of banks in the sector, the operational differences between the conventional and Islamic banks. We also aim to predict a future road for the banking sector, which is the largest in the GCC.
The aim of this paper was conducted to investigate the financial performance of Islamic and Conventional banks to support depositors, bank managers, shareholders, investors and regulators by providing true picture of financial position of Islamic as well conventional banks in Pakistan. The ratios often compare financial statement data with stock market trading information for publicly traded companies. Financial ratios are an important tool of economic decision-making for all businesses.. It is important to choose financial ratios that are applicable to the business at hand. There are hundreds of financial ratios available, some of which apply to all businesses and some of which are industry-specific. Financial ratios were estimated from annual reports and financial statements i.e. Income statement and Balance sheet for the period of 2008 to 2011. Twelve financial ratios were estimated to measure these performances in term of profitability, liquidity, risk and solvency, capital adequacy. To determine the significance of mean differences of these ratios, Independent sample t-test and ANOVA was used between and among banks. The study concluded that Islamic banks proved to be more liquid, less risky and operationally efficient than conventional banks
Competitive conditions and market power of Islamic and conventional commercial banks
Purpose – The expansion of the Islamic banking industry seems to accentuate the banking competition in MENA and Southeast Asia where conventional and Islamic banks coexist. In this context, the research aims\ to examine the competitive conditions and the market power of the conventional and Islamic banks during the period 2004-2009 in MENA and Southeast Asia region. Design/methodology/approach – The authors use a variety of structural and non-structural measures related to the traditional approach and the new empirical approach of the industrial organization. The methodology is based on set of measures of the competition and market power. The first measure is a set of concentration ratios (C3, C5) and Herfindahl-Hirschman index (HHI). The second measures are the Panzar and Ross H statistic and the Lerner index based on econometric estimations with the aim of evaluating the structure of market and measuring its power in terms of price setting. Findings – The results indicate that under the HHI index, both markets are low concentrated, while according to the concentration ratios, the Islamic market is considered as moderately concentrated. The estimations results, through the H-PR-statistic of Panzar and Ross related to degree of competition and the Lerner index of market power, indicate that both markets are characterized by a monopolistic competition and the Islamic banking expressed a high degree of market power. Research limitations/implications – The research focuses exclusively on the countries where the data are available and excludes the other countries where competition and market power might have different forms. Practical implications – In a competitive environment, each bank is required to analyze the structure of its market and competitive conditions, in order to develop a business strategy and effective action plans. In the context of the multiplication of the Islamic banks in the MENA and Southeast Asia, the enhancement of Islamic bank competitiveness by offering new products is determinant for their success. Originality/value – To the best of the authors' knowledge few studies have examined this subject in a comparative analysis between the Islamic and conventional banks. So the authors contribute to the literature on Islamic banking by considering a sample of Islamic and conventional banks operating in the same countries in order to examine the existence or not of difference between them.