The Determinants and Policy Implications of Off-Balance Sheet Activities in MENA Countries Commercial Banks
Although there is literature about off-balance sheet (OBS) activities in the banking system, this is the first paper that investigates the off-balance sheet activities in the Middle East and North Africa (MENA) banking industry. It aims to test the tax regulatory hypothesis and the market discipline hypothesis in determining OBS activities of MENA commercial banks using a panel dataset for the period 1996–2007. We employ Mansfield’s (1961) logistic diffusion model and we consider OBS activities as real financial innovation following a time trend diffusion curve. The model is modified to include regulatory and non-regulatory bank-specific factors in addition to macroeconomic factors. We also added a country dummy vector to incorporate the country’s institutional and financial environment and time dummy vector to control for the political and economic events over time. The results reveal that OBS activities do not follow Mansfield’s financial diffusion model, and that adoption is decreasing over time. Regulatory tax hypothesis is rejected for the case of MENA banks since most of them face high regulatory pressure which negatively affects the OBS adoption. The results also suggest that OBS activities follow the business cycle notion and that the usage decision depends on economic conditions. Moreover, there exists an informational economy of scope between loans and OBS activities. Banks will participate more in OBS activities to reduce their risk resulting from loans. Also, OBS activities are profit driven. Political and economic events negatively affect MENA banks’ OBS activities. The implications of these results suggest that regulations, institutional and technological deficiency in MENA countries prevent the banking system from adopting different financial innovations.
|Date of creation:||10 Jan 2010|
|Date of revision:||10 Jan 2010|
|Publication status:||Published by The Economic Research Forum (ERF)|
|Contact details of provider:|| Postal: 21 Al-Sad Al Aaly St. Dokki, Giza|
Web page: http://www.erf.org.eg
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lawrence M. Benveniste & Allen N. Berger, 1987. "Securitization with recourse: an instrument that offers uninsured bank depositors sequential claims," Research Papers in Banking and Financial Economics 97, Board of Governors of the Federal Reserve System (U.S.).
- Jagtiani, Julapa & Saunders, Anthony & Udell, Gregory, 1995. "The effect of bank capital requirements on bank off-balance sheet financial innovations," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 647-658, June.
- Avery, Robert B. & Berger, Allen N., 1991.
"Loan commitments and bank risk exposure,"
Journal of Banking & Finance,
Elsevier, vol. 15(1), pages 173-192, February.
- Robert B. Avery & Allen N. Berger, 1988. "Loan commitments and bank risk exposure," Finance and Economics Discussion Series 36, Board of Governors of the Federal Reserve System (U.S.).
- Robert B. Avery & Allen N. Berger, 1990. "Loan commitments and bank risk exposure," Working Paper 9015, Federal Reserve Bank of Cleveland.
- Robert B. Avery & Allen N. Berger, 1989. "Loan commitments and bank risk exposure," Finance and Economics Discussion Series 65, Board of Governors of the Federal Reserve System (U.S.).
- Hassan, M. Kabir & Karels, Gordon V. & Peterson, Manfred O., 1994. "Deposit insurance, market discipline and off-balance sheet banking risk of large U.S. commercial banks," Journal of Banking & Finance, Elsevier, vol. 18(3), pages 575-593, May.
- Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-381, July.
- Benveniste, Lawrence M. & Berger, Allen N., 1987. "Securitization with recourse : An instrument that offers uninsured bank depositors sequential claims," Journal of Banking & Finance, Elsevier, vol. 11(3), pages 403-424, September.
- D.M. Nachane & Saibal Ghosh, 2007. "An Empirical Analysis of the Off-Balance Sheet Activities of Indian Banks," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 6(1), pages 39-59, January.
- Nachane, D M & Ghosh, Saibal, 2007. "An empirical analysis of the off-balance sheet activities of Indian banks," MPRA Paper 17304, University Library of Munich, Germany.
- Berger, Allen N. & Udell, Gregory F., 1990. "Collateral, loan quality and bank risk," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 21-42, January.
- Allen N. Berger & Gregory F. Udell, 1988. "Collateral, loan quality, and bank risk," Finance and Economics Discussion Series 51, Board of Governors of the Federal Reserve System (U.S.).
- Jacques, Kevin & Nigro, Peter, 1997. "Risk-based capital, portfolio risk, and bank capital: A simultaneous equations approach," Journal of Economics and Business, Elsevier, vol. 49(6), pages 533-547.
- Furlong, Frederick T. & Keeley, Michael C., 1989. "Capital regulation and bank risk-taking: A note," Journal of Banking & Finance, Elsevier, vol. 13(6), pages 883-891, December.
- Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
- Ronn, Ehud I & Verma, Avinash K, 1986. " Pricing Risk-Adjusted Deposit Insurance: An Option-Based Model," Journal of Finance, American Finance Association, vol. 41(4), pages 871-895, September.
- Pang-tien Lieu & Tsai-lien Yeh & Yung-ho Chiu, 2005. "Off-balance sheet activities and cost inefficiency in Taiwan's Banks," The Service Industries Journal, Taylor & Francis Journals, vol. 25(7), pages 925-944, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:552. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Namees Nabeel)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.