IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0253803.html
   My bibliography  Save this article

Competition, capital growth and risk-taking in emerging markets: Policy implications for banking sector stability during COVID-19 pandemic

Author

Listed:
  • Miroslav Mateev
  • Muhammad Usman Tariq
  • Ahmad Sahyouni

Abstract

This paper investigates how banking competition and capital level impact on the risk-taking behavior of banking institutions in the Middle East and North Africa (MENA) region. The topic is perceived to be of significant importance during the COVID-19 pandemic. We use data for more than 225 banks in 18 countries in the MENA region to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between Islamic and conventional banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. We also provide evidence that banks in the MENA region increase their capitalization levels in response to a higher risk and vice versa. Further, banking concentration (measured by the HH-index) and credit risk have a significant and positive impact on capital ratios of IBs, whereas competition does play a restrictive role in determining the level of their capital. The results hold when controlling for ownership structure, regulatory and institutional environment, bank-specific and macroeconomic characteristics. Our findings inform regulatory authorities concerned with improving the financial stability of banking sector in the MENA region to strengthen their policies in order to force banks to better align with capital requirements and risk during the COVID-19 pandemic.

Suggested Citation

  • Miroslav Mateev & Muhammad Usman Tariq & Ahmad Sahyouni, 2021. "Competition, capital growth and risk-taking in emerging markets: Policy implications for banking sector stability during COVID-19 pandemic," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-36, June.
    • Handle: RePEc:plo:pone00:0253803
    DOI: 10.1371/journal.pone.0253803
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0253803
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0253803&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0253803?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mohammed Makni, 2022. "The Impact of Covid-19 on the Financial Performance of Banking Sector Operating in GCC Countries," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 8(2), pages 50-57, 06-2022.
    2. Jiang, Haiyun & Xu, Shulin & Cui, Jingwen & Subhani, Ghulam, 2023. "The impact of bank capital, liquidity and funding liquidity on sustainable bank lending: Evidence from MENA region," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 713-726.
    3. Dania AL-Najjar & Hamzeh F Assous, 2021. "Key determinants of deposits volume using CAMEL rating system: The case of Saudi banks," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-15, December.
    4. Faisal Mohammed O. Almaslukh & Haliyana Khalid & Alaa Mahdi Sahi, 2022. "The Impact of Internal Marketing Practices on Employees’ Job Satisfaction during the COVID-19 Pandemic: The Case of the Saudi Arabian Banking Sector," Sustainability, MDPI, vol. 14(15), pages 1-15, July.
    5. Malgorzata Mikita, 2022. "The Interrelationship Among Efficiency and Concentration of Banking System and its Stability: Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 670-689.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0253803. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.