How Foreign and Domestic Ownership Influenced Risk-Taking in GCC Banks

Abdullah Aldousari (), Ahmed Mohammed and Sarah Lindop
Additional contact information
Abdullah Aldousari: Department of Accounting and Finance, Aberystwyth University, Aberystwyth SY23 3FL, UK
Ahmed Mohammed: Department of Accounting and Finance, Aberystwyth University, Aberystwyth SY23 3FL, UK
Sarah Lindop: Department of Accounting and Finance, Aberystwyth University, Aberystwyth SY23 3FL, UK

IJFS, 2025, vol. 13, issue 1, 1-22

Abstract: This study investigates the relationship between ownership structure (foreign and domestic) and bank risk-taking over the period 2014–2022. The analysis includes 66 banks operating in the GCC, divided into 44 domestically owned, and 22 foreign-owned banks. The research examines the relationship across two distinct periods: the pre-pandemic and the COVID-19 pandemic era, using the two-stage least squares (2SLS) method, and panel data techniques for robust analysis. The findings reveal that, in both periods, foreign-owned banks exhibited lower credit risk, greater cost efficiency, and less risk-taking compared to domestic counterparts. Domestic banks, while maintaining profitability, relied heavily on capital absorbency, which resulted in elevated credit risk and operational inefficiencies. These inefficiencies, observed among domestic banks, stem from inadequate monitoring of borrowers’ information and the occurrence of moral hazard. Foreign banks played a crucial role in supporting banking sector stability, as their presence enhanced the GDP growth. The results are in line with the “global advantage hypothesis”.

Keywords: ownership structure; bank risk-taking; foreign ownership; domestic ownership; COVID-19 pandemic; non-performing loan NPLs; bank stability (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7072/13/1/33/pdf (application/pdf)
https://www.mdpi.com/2227-7072/13/1/33/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijfss:v:13:y:2025:i:1:p:33-:d:1603648

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().