Basel Awartani

Oil Price Uncertainty and Equity Returns: Evidence from Oil Importing and Exporting Countries in the MENA Region

Purpose - This paper aims to examine the impact of oil price uncertainty on the stock market returns of ten oil importing and exporting countries in the Middle East and North Africa (MENA) region. The sample contains both oil importing and oil exporting countries that depend heavily on oil production and exports. Design/methodology/approach - This paper intuitively applies the generalized autoregressive conditional heteroskedasticity (GARCH)-in-mean vector autoregression (VAR) model using weekly data over the period January 2001-February 2014. Findings - The findings indicate that oil uncertainty matters in the determination of real stock returns. There is a negative and significant relationship between oil price uncertainty and real stock returns in all countries in the sample. The influence of oil price risk is more serious in those economies that depend heavily on oil revenues to grow. Practical implications - The findings have important implications. For instance, managers should be aware of the linkages between oil price uncertainty and equity returns when they use oil to hedge and diversify equities, particularly in economies where oil is important for economic growth. The policymakers in oil importing countries should encourage companies to improve efficiency in the usage of energy and to resort to alternative sources to avoid fluctuations in earnings and equity prices. In the countries that heavily depend on oil efforts should focus on diversifying the domestic economy away from oil to protect against oil price fluctuations. Originality/value - To the best of our knowledge, this is the first attempt to study the influence of oil price uncertainty in the MENA region. The sample contains both oil importing and oil exporting countries that depend heavily on oil production and exports. The empirical findings of the paper have valuable policy implications for investors, market participants and policymakers.

The effect of market structure, regulation, and risk on banks efficiency: Evidence from the Gulf cooperation council countries

Purpose - – The purpose of this paper is to analyze the efficiency performance of the Gulf Cooperation Countries (GCC) banking sector. The primary focus is to assess whether market power, risk taking activities, and regulations have significant effects on GCC banks’ efficiency performance. Design/methodology/approach - – The estimation and inference has been implemented using a double bootstrap procedure that simultaneously corrects for bias and validates inference on the influence of covariates. In the first stage, efficiency scores are estimated with data envelopment analysis (DEA). In the second stage, variation in the resulting efficiency scores is explained using a truncated regression model with inference based on a semi-parametric bootstrap routine. Findings - – The authors found compelling evidence that efficiency is not independent of the market structure, the banks risk taking activities, and the regulatory environment. In particular, the Lerner Index provides evidence that market power decreases efficiency. The capital adequacy, the supervisory power and the market discipline were all found to improve efficiency. Additionally, when the risk is measured by the Research limitations/implications - – The results of the current study have important implications for regulators and supervisors. Promoting banks’ competitive environment in the GCC countries through reducing the information barriers to entry, encouraging bank privatization, and lowering the activities restrictions can potentially improve operational efficiency of banks. Also enhancing banks’ diversification activities and risk management techniques may have the advantage of increasing operational efficiency. Furthermore, improvements in the regulatory conditions that enhance banking supervision and monitoring would also improve efficiency. Originality/value - – The main contributions of the paper are threefold: first, to the knowledge, this study is the first to employ by far the most comprehensive data set of GCC banks investigated to date. Second, the analysis focusses on the influence of a wide set of factors, most of them was not covered before in related economic literature on bank efficiency of the GCC countries. Third, the methodological innovation involves applying a double bootstrap procedure proposed by Simar and Wilson (2007).