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Bank risk and performance in the MENA region: The importance of capital requirements

Mohammad Bitar, Wadad Saad and Mohammed Benlemlih

Economic Systems, 2016, vol. 40, issue 3, 398-421

Abstract: This paper benefits from various risk- and non-risk-based regulatory capital ratios and examines their impact on bank risk and performance in the Middle East and North Africa (MENA) region. Our findings suggest that compliance with the Basel capital requirements enhances bank protection against risk, and improves efficiency and profitability. The impact of capital requirements on bank performance is more pronounced for too-big-to-fail banks, banks in periods of crisis and banks in countries with good governance. The results are also robust when controlling for the Arab Spring transition period. Finally, endogeneity checks, alternative risk and performance measures, a principal component analysis and other estimation techniques confirm our findings.

Keywords: Basel capital; Too-big-to-fail; Arab Spring; Risk; Efficiency; Profitability (search for similar items in EconPapers)
JEL-codes: G21 G28 G32 P5 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:eee:ecosys:v:40:y:2016:i:3:p:398-421