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Does Banking Market Power Matter on Financial (In)Stability? Evidence from the Banking Industry MENA Region

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  • Widede Labidi
  • Sami Mensi

    (University of Manouba)

Abstract

The various financial crises during the last two decades, and particularly since the 2007-2008 Global Financial Crisis, have revealed the complexity of the interaction between bank market structure, regulation and the stability of the banking industry. Due to its effects on financial stability, banking market structure has been a focus of academic and policy debates of which we prefer the market power paradigm. More precisely, the impact of competition and market concentration on the probability of financial crisis emerges as a crucial topic. Despite their importance, little is known about the relationship between Banking Market Power and Bank Soundness of banks in the MENA region. This paper tries to overcome the tradeoff between banking market power and financial (in) stability among 157 commercial banks chosen from 18 countries in the MENA region between 2000 and 2008. The results indicate that although the banks operate in a competitive market, they suffer from financial instability. The results also reveal a non-significant negative relationship between the rather low degree of market power and financial instability. In other words, we concluded that financial instability is not affected by competition in the banking market in the MENA region.

Suggested Citation

  • Widede Labidi & Sami Mensi, 2015. "Does Banking Market Power Matter on Financial (In)Stability? Evidence from the Banking Industry MENA Region," Working Papers 908, Economic Research Forum, revised May 2015.
    • Handle: RePEc:erg:wpaper:908
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    Cited by:

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    2. Samangi Bandaranayake & Kuntal K. Das & W. Robert Reed, 2018. "A Replication of “Bank Competition and Financial Stability: Much Ado About Nothing?” (Journal of Economic Surveys, 2016)," Working Papers in Economics 18/18, University of Canterbury, Department of Economics and Finance.
    3. Hashed Mabkhot & Hamid Abdulkhaleq Hasan Al-Wesabi, 2022. "Banks’ Financial Stability and Macroeconomic Key Factors in GCC Countries," Sustainability, MDPI, vol. 14(23), pages 1-21, November.
    4. Mudeer A. Khattak & Buerhan Saiti & Shabeer Khan, 2023. "Does market power explain margins in dual banking? Evidence from panel quantile regression," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1826-1844, April.

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G00 - Financial Economics - - General - - - General

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