Local versus International Crises and Bank Stability: Does Bank Foreign Expansion Make a Difference?

58 Pages Posted: 8 Feb 2016 Last revised: 13 Mar 2017

See all articles by Tammuz Alraheb

Tammuz Alraheb

Université de Limoges, LAPE

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: March 13, 2017

Abstract

We investigate the impact of global and local crises on bank stability in the MENA region and examine the effect of owning bank subsidiaries in other countries. We consider banks that experienced both types of crises during our sample period.

Our findings highlight a negative impact of the Global Financial Crisis of 2007-2008 on bank stability but, on the whole, no negative impact of the local crisis. A deeper investigation shows that owning bank subsidiaries outside the home country is a source of increased fragility during normal times, yet a source of higher stability during the local crisis but not during the international crisis. Moreover, owning foreign subsidiaries in one or two world regions is insufficient to neutralize both types of crises, while being present in three or more regions is more stabilizing during a local crisis but also more destabilizing during an international crisis. Our findings contribute to the literature examining bank stability and have several policy implications.

Keywords: Banks, Stability, Risk, MENA, Subsidiaries, Crisis, Arab Spring, Global Financial Crisis, Credit Risk, Z-score, Zscore

JEL Classification: G01, G21, G28

Suggested Citation

Alraheb, Tammuz and Tarazi, Amine, Local versus International Crises and Bank Stability: Does Bank Foreign Expansion Make a Difference? (March 13, 2017). Available at SSRN: https://ssrn.com/abstract=2729228 or http://dx.doi.org/10.2139/ssrn.2729228

Tammuz Alraheb (Contact Author)

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

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