Ownership, regulation and bank risk-taking: evidence from the Middle East and North Africa (MENA) region
Ownership, regulation and bank risk-taking: evidence from the Middle East and North Africa (MENA) region
Purpose
This study aims to investigate how ownership structure and bank regulations individually and interactively influence risk-taking behaviour of a bank.
Design/methodology/approach
This empirical framework is based on dynamic two-step system
generalised method of moments estimation technique to analyse an unbalanced panel data set covering 144 conventional banks from12 Middle East and North Africa (MENA) countries.
Findings
The estimation results suggest that foreign shareholding has an inverse relationship with bank risk-taking. In addition, official supervisory power is found to have a positive association with bank risk, and this relationship is reinforced for banks with higher ownership concentration. In addition, capital stringency increases bank risk, whereas market discipline has an opposite effect, only in countries with higher activity restrictions. Finally, the interaction between ownership concentration and activity restriction has an inverse association with bank risk-taking.
Research limitations/implications
Overall, the evidence suggests that the Basel II framework and the regulatory reform initiatives in the post-global financial crisis period do not seem to have reduced bank risk-taking in MENA countries.
Originality/value
This study contributes to the literature on the effectiveness of regulatory reform based on the three pillars of the Basel II guidance (capital regulations, market-oriented disclosures and official supervisory power), and offers evidence in support of ‘‘political/regulatory capture hypothesis’’ of bank regulation. The results also provide support for ‘‘global advantage hypothesis’’ of bank ownership
23-43
Haque, Faizul
8153d83c-427a-4f73-860d-dd7e9460533d
4 February 2019
Haque, Faizul
8153d83c-427a-4f73-860d-dd7e9460533d
Haque, Faizul
(2019)
Ownership, regulation and bank risk-taking: evidence from the Middle East and North Africa (MENA) region.
Corporate Governance, 19 (1), .
(doi:10.1108/CG-07-2017-0135).
Abstract
Purpose
This study aims to investigate how ownership structure and bank regulations individually and interactively influence risk-taking behaviour of a bank.
Design/methodology/approach
This empirical framework is based on dynamic two-step system
generalised method of moments estimation technique to analyse an unbalanced panel data set covering 144 conventional banks from12 Middle East and North Africa (MENA) countries.
Findings
The estimation results suggest that foreign shareholding has an inverse relationship with bank risk-taking. In addition, official supervisory power is found to have a positive association with bank risk, and this relationship is reinforced for banks with higher ownership concentration. In addition, capital stringency increases bank risk, whereas market discipline has an opposite effect, only in countries with higher activity restrictions. Finally, the interaction between ownership concentration and activity restriction has an inverse association with bank risk-taking.
Research limitations/implications
Overall, the evidence suggests that the Basel II framework and the regulatory reform initiatives in the post-global financial crisis period do not seem to have reduced bank risk-taking in MENA countries.
Originality/value
This study contributes to the literature on the effectiveness of regulatory reform based on the three pillars of the Basel II guidance (capital regulations, market-oriented disclosures and official supervisory power), and offers evidence in support of ‘‘political/regulatory capture hypothesis’’ of bank regulation. The results also provide support for ‘‘global advantage hypothesis’’ of bank ownership
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More information
Accepted/In Press date: 28 June 2018
Published date: 4 February 2019
Identifiers
Local EPrints ID: 446810
URI: http://eprints.soton.ac.uk/id/eprint/446810
ISSN: 1472-0701
PURE UUID: d5417930-3e8c-4c4c-a845-ae71b60432a2
Catalogue record
Date deposited: 23 Feb 2021 17:32
Last modified: 17 Mar 2024 04:06
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