Competition and bank stability in the MENA region: The moderating effect of Islamic versus conventional banks

摘要

This paper investigates the impact of competition on bank stability using data from 276 banks across eighteen MENA countries between 2006-2015. We controlled for financial inclusion, productivity, and macroeconomic instability in addition to several different control variables, including bank size, efficiency, diversification and leverage. The two-step system GMM suggested that banks facing little competition tended to take less insolvency and credit risks and enjoy more profitability. Furthermore, we found that the competition-fragility effect is more prominent for Islamic banks than conventional ones in MENA countries. This study contains some significant policy implications for regulators looking to improve bank stability.