Competition, capital growth and risk-taking in emerging markets: Policy implications for banking sector stability during COVID-19 pandemic.

ABSTRACT: This paper investigates how banking competition and capital level impact on the risk-taking behavior of banking institutions in the Middle East and North Africa (MENA) region. The topic is perceived to be of significant importance during the COVID-19 pandemic. We use data for more than 225 banks in 18 countries in the MENA region to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between Islamic and conventional banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. We also provide evidence that banks in the MENA region increase their capitalization levels in response to a higher risk and vice versa. Further, banking concentration (measured by the HH-in

SUBMITTER: Mateev M 

PROVIDER: S-EPMC8224939 | biostudies-literature | 2021

REPOSITORIES: biostudies-literature