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Political risk and bank stability in the Middle East and North Africa region

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  • Al-Shboul, Mohammad
  • Maghyereh, Aktham
  • Hassan, Abul
  • Molyneux, Phillip

Abstract

This paper examines the relationship between political risk and bank stability in the Middle East and North Africa (MENA) region. We find that political risk is adversely associated with bank stability, generally supporting the financial fragility hypothesis. The analysis suggests that political risk differentially influences the level of stability of conventional and Islamic banks. Political risk has a less detrimental effect on the riskiness of Islamic banks compared with conventional banks. Our analysis also suggests that Islamic banks in the Gulf Cooperative Council (GCC) sub-region are less exposed to political risk compared with those operating in the non-GCC countries (other countries in the MENA region outside of the GCC sub-region).

Suggested Citation

  • Al-Shboul, Mohammad & Maghyereh, Aktham & Hassan, Abul & Molyneux, Phillip, 2020. "Political risk and bank stability in the Middle East and North Africa region," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    • Handle: RePEc:eee:pacfin:v:60:y:2020:i:c:s0927538x19303609
    DOI: 10.1016/j.pacfin.2020.101291
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    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G01 - Financial Economics - - General - - - Financial Crises
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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