Abstract
This study aims to detect the impact of the corporate governance structures on MENA banks’ stability and risk-taking. In particular, it aims at considering if bank type (conventional or Islamic) is a major determinant of the relationship between corporate governance, bank stability and risk-taking. The research adopts panel data econometrics on a sample containing the largest 100 MENA banks operating between 2011 and 2021. The empirical estimations examine the impact of board size, board independence, board gender diversity, role duality, the existence of risk, governance and nomination and remuneration committees as well as ownership blockholdings, on bank Z-scores and NPL ratios. The empirical results show that the exploited variables impact conventional and Islamic banks stability and risk differently. For instance, a larger board size has a positive effect on conventional bank stability, while it is irrelevant for Islamic banks. For role duality, the opposite findings have been observed. The risk committee plays an important role in Islamic banks risk mitigation, unlike the case of conventional banks. Finally, the existence of blockholdings poses considerable risk for conventional banks only.
Appendix A: Explanation of the Exploited Variables
| Variable | Explanation |
|---|---|
| Dependent variables | |
|
|
|
| Log Z-score (LNZ) | Natural log of
|
| Loan-loss-provisions (LLP) | Loan-loss-provisions divided by gross loans |
|
|
|
| Independent variables | |
|
|
|
| Board size (BOARD) | Number of board members |
| Independent members (INDEP) | The % of independent board members |
| Duality (DUAL) | Dummy variable: 1 if the chairman is at the same time the CEO/GM, 0 otherwise |
| Board diversity (WOM) | The % of women board members |
| Risk committee (RISK_COM) | Dummy variable: 1 for the existence of risk committee within the board, 0 otherwise |
| Governance committee (GOV_COM) | Dummy variable: 1 for the existence of governance committee within the board, 0 otherwise |
| Nomination and remuneration committee (NOM_COM) | Dummy variable: 1 for the existence of nomination and remuneration committee within the board, 0 otherwise |
| Ownership concentration (CONC) | The % of ownership of the top 3 shareholders |
|
|
|
| Control variables | |
|
|
|
| Return on assets (ROA) | After-tax net income divided by average assets |
| Bank capital (CAP) | Equity-to-asset ratio |
| Size (SIZE) | Natural log of bank assets |
| Public ownership (PUB) | Dummy variable: 1 for majority government ownership (more than 50 %), 0 otherwise |
| GDP growth rate (GDPG) | Real growth rate of gross domestic product |
| Regulatory quality (REG) | The World Bank’s Regulatory Quality Index |
| Rule of law (LAW) | The World Bank’s Rule of Law Index |
Appendix B: Geographical Distribution of Included Banks
| Country | Conventional banks included in the study | Islamic banks included in the study | Total banks included in the study | Total number of banks* |
|---|---|---|---|---|
| Algeria | 3 | 0 | 3 | 8 |
| Bahrain | 6 | 5 | 11 | 66 |
| Egypt | 7 | 2 | 9 | 14 |
| Jordan | 3 | 1 | 4 | 14 |
| Kuwait | 5 | 4 | 9 | 10 |
| Lebanon | 9 | 0 | 9 | 24 |
| Libya | 3 | 0 | 3 | 20 |
| Morocco | 4 | 0 | 4 | 12 |
| Oman | 5 | 2 | 7 | 10 |
| Palestine | 1 | 0 | 1 | 8 |
| Qatar | 6 | 4 | 10 | 10 |
| Saudi Arabia | 6 | 5 | 11 | 11 |
| Tunisia | 1 | 0 | 1 | 9 |
| United Arab Emirates | 12 | 6 | 18 | 19 |
| Total | 71 | 29 | 100 | 235 |
| Total assets | $3.8 trillion | $4.5 trillion |
-
Source: Countries’ central banks. Note: * local banks or banking groups only.
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Artikel in diesem Heft
- Frontmatter
- Research Articles
- Corporate Governance, Bank Stability and Risk-Taking: Differences Between Conventional and Islamic Banks
- How Does Financial Inclusion Affect Bank Stability? Evidence from the Banking Sector in Ethiopia
- Time-Varying Causality Impact of Global Economic Conditions Index on Remittances in Lebanon
- The October 2023 Israel-Hamas Conflict: A Catalyst for Energy Transition
- Policy Note
- Quantifying the Economic Cost of the Qatar Blockade Using Synthetic Control
Artikel in diesem Heft
- Frontmatter
- Research Articles
- Corporate Governance, Bank Stability and Risk-Taking: Differences Between Conventional and Islamic Banks
- How Does Financial Inclusion Affect Bank Stability? Evidence from the Banking Sector in Ethiopia
- Time-Varying Causality Impact of Global Economic Conditions Index on Remittances in Lebanon
- The October 2023 Israel-Hamas Conflict: A Catalyst for Energy Transition
- Policy Note
- Quantifying the Economic Cost of the Qatar Blockade Using Synthetic Control