Regulation, Ownership and Bank Performance in the MENA Region: Evidence From Islamic and Conventional Banks

44 Pages Posted: 25 Apr 2019

See all articles by Miroslav Mateev

Miroslav Mateev

American University in the Emirates; American University in Bulgaria - Business and Economics Department

Petko Bachvarov

Higher School of Insurance and Finance

Date Written: March 28, 2019

Abstract

This paper investigates the impact of regulation and ownership on the performance of banks in 19 countries in the Middle East and North Africa (MENA) region. We test the hypothesis that the effect of regulation on bank profitability depends on the type of ownership structure. The public and private views of bank regulation are also tested along with the interaction of bank regulation and ownership. We find regulation measures to have a strong influence on bank profitability, whereas ownership structure seems to play a limited role in explaining bank profitability in the MENA region. The results support the private view of bank regulation and suggest that capital requirements and private monitoring when interacted with ownership concentration exert a strong influence on bank profitability. When the analysis is done separately for conventional and Islamic banks, we find that the impact of bank regulations although strongly significant, does not depend on the type of ownership structure prevailing in conventional banks. In contrast, regulatory effects seem to be important drivers of profitability of Islamic banks. This effect is more pronounced for government banks and banks with high level of foreign ownership. Therefore, it is very important for policy makers in these countries not to treat the two types of banks identically when setting up and implementing bank regulations.

Keywords: global financial crisis, ownership, bank regulation, efficiency, profitability

JEL Classification: G21, G28, G30, G38

Suggested Citation

Mateev, Miroslav and Bachvarov, Petko, Regulation, Ownership and Bank Performance in the MENA Region: Evidence From Islamic and Conventional Banks (March 28, 2019). Available at SSRN: https://ssrn.com/abstract=3361462 or http://dx.doi.org/10.2139/ssrn.3361462

Miroslav Mateev (Contact Author)

American University in the Emirates ( email )

Dubai International Academic City
Dubai, 503000
United Arab Emirates
00971529907492 (Phone)

HOME PAGE: http://www.aue.ae

American University in Bulgaria - Business and Economics Department ( email )

Blagoevgrad, 2700
Bulgaria

Petko Bachvarov

Higher School of Insurance and Finance ( email )

Sophia
Bulgaria

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