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Risk and Profitability in Middle East and North Africa Banking System: An Examination of off Balance Sheet Activities

Author

Listed:
  • Ahmad Y Khasawneh
  • Husam Aldeen Al-Khadash

Abstract

This study analyzes the role of off-balance sheet activities in banks profitability and banks risk in the Middle East and North Africa banking system. The uniqueness of this study stems from the investigation timing of and its sample data. The study covers the period covering the 2006/2007 financial crises. We form our sample from Middle East and North Africa banking system, including different countries and different bank types. The results indicate that off balance sheet activities are risk reducing as well as profit generators in Middle East and North Africa banks. The results also indicate the effect of off balance sheet activities on banks profitability is higher in the case of banks located in oil producing countries. There is no significant difference between the impact of off balance sheet activities and bank risk for banks located in oil producing countries. Furthermore, the results show that commercial bank profitability is more sensitive to off balance sheet activities. Bank risk is more sensitive to off balance sheet activities in case of Islamic banks.

Suggested Citation

  • Ahmad Y Khasawneh & Husam Aldeen Al-Khadash, 2014. "Risk and Profitability in Middle East and North Africa Banking System: An Examination of off Balance Sheet Activities," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(3), pages 13-26.
  • Handle: RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:13-26
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    More about this item

    Keywords

    Bank Risk; Bank Performance; Off Balance Sheet Activities; MENA Banking System; Islamic Versus Commercial Banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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