Competition and Profitability of Banks: Empirical evidence from the Middle East & North African (MENA) Countries

Syed Moudud-Ul-Huq (Department of Business Administration, Mawlana Bhashani Science and Technology University)
Md. Abdul Halim (Department of Business Administration, Mawlana Bhashani Science and Technology University)
Tanmay Biswas (Department of Business Administration, Mawlana Bhashani Science and Technology University)

Article ID: 1807

DOI: https://doi.org/10.30564/jbar.v3i2.1807

Abstract


This paper uses generalized method of moments (GMM), Least Squares (LS) and Generalized Linear Model (GLM) to examine the impact of competition on profitability of banks and Stochastic Frontier approach (SFA) is used to estimate of cost efficiency. We have used an unbalanced panel dataset from a sample of emerging economic MENA countries over the period between 2011 and 2017. We find out that have a significant and negative impact of competition on profitability of banks. The empirical findings of this study suggest that (1) MENA banks should more improve the process of managing and monitoring the loan segment business ; the result which reducing in the level of credit risk which leads to higher profitability (2) MENA banks should shrink higher level of banking sector development. (3) MENA banks should make full conduct of available funds to engage in various natures of businesses; if there is an issue of insolvency, robust government support would give protection to MENA banks. Finally, it also provides some compulsory policy implications which will be very much beneficial for a wide range of stakeholders.


Keywords


Competition; Profitability; Credit Risk; Z-score; Lerner Index; Panel Regression

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References


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