Competition in the banking industry, is it beneficial? Evidence from MENA region

Faten Zoghlami () and Yassine Bouchemia
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Faten Zoghlami: University of Manouba
Yassine Bouchemia: University of Manouba

Journal of Banking Regulation, 2021, vol. 22, issue 2, No 7, 169-179

Abstract: Abstract Using a sample of 197 commercial banks operating in the MENA region, this paper examines the impact of competition on bank profitability and risk-taking, during the period 2011–2018. To assess competition, we have used both market structure-based and non-market structure-based indicators. Results indicate that competition would impact differently banks’ profitability and risk-taking. On the one hand, an increase in competition seems to hurt banks’ net—interest margin and loan quality, but on the other hand, the competition seems to enhance banks’ ROA and ROE. In line with existing literature, we suggest that competition reduces interest-based income, and increases bank fragility, but it seems to enhance the development of new non-interest-based activities, improving hence the overall banks’ profitability. We argue that our findings would contribute to the current debate on the effectiveness of the deregulation reform initiated in several MENA countries and help to resolve the trading-off between competition and bank stability.

Keywords: Competition; Banks’ profitability; Lerner index; HHI; Banks’ risk-taking; MENA banking markets (search for similar items in EconPapers)
JEL-codes: G21 G28 G31 L1 L16 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41261-020-00135-z

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