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

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 performance 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 though 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 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 especially during the COVID-19 pandemic © 2020 Elsevier B V