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Competition, cost efficiency and stability of banks in the MENA region

Chawki El Moussawi and Rana Mansour

The Quarterly Review of Economics and Finance, 2022, vol. 84, issue C, 143-170

Abstract: The objective of this paper is to study the relationship between competition, cost efficiency, and bank stability for a sample of 222 commercial banks operating in the Middle East and North Africa (MENA) region over the period 1999–2018. The results obtained by the system Generalized Method of Moments (GMM) show that competition positively affects both the cost efficiency and stability of the banks in our sample, where competition is measured by the Panzar-Rosse H-statistic and alternatively by the Lerner index. Moreover, the results reveal the existence of a significant relationship between most bank-specific, macroeconomic and institutional factors and the cost efficiency and stability of banks. The robustness checks prove that the ownership structure of banks is an important determinant of banking stability and detect a nonlinear relationship between competition and banking stability. These results imply that banking regulatory policies in MENA countries should be careful not to over-consolidate the sector at the detriment of both efficiency and stability.

Keywords: Bank competition; Cost efficiency; Stability; Institutional quality; Ownership; MENA region (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.qref.2021.12.005

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