Noninterest income mix and bank performance: Generalized propensity score fractional dose–response function evidence

Nesrine Ammar and Adel Boughrara

Global Finance Journal, 2023, vol. 56, issue C

Abstract: This paper investigates the impact of different levels of noninterest income on the risk-adjusted profitability and financial stability of banks in the Middle Eastern and North African banking industry from 1988 to 2020. We apply a program impact evaluation analysis, using the generalized propensity score-fractional dose–response function method, and assess the effect of each level (or dose) of noninterest income mix on bank performance (the dose–response function). Splitting the sample into Gulf Cooperation Council- and non-Gulf Cooperation Council-based banks reveals that while higher levels of revenue diversification are beneficial for the former, a focus on traditional banking activities is preferable for the latter to achieve the best performance. The findings could serve as an early warning flag for bank managers, policy-makers, and regulators in dealing with these strategic shifts.

Keywords: Dose–response function; Generalized propensity score; Noninterest income; Revenue diversification (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:56:y:2023:i:c:s1044028322000734

DOI: 10.1016/j.gfj.2022.100771

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