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Competition and bank stability in the MENA region: The moderating effect of Islamic versus conventional banks

Mohamed Albaity, Ray Saadaoui Mallek and Abu Hanifa Md. Noman

Emerging Markets Review, 2019, vol. 38, issue C, 310-325

Abstract: 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.

Keywords: Banking stability, fragility/stability; Size; Moderation; Competition; Productivity; Financial inclusion (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 L1 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.ememar.2019.01.003

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