Bank Efficiency, Competition and Concentration in MENA Region Countries: A Granger Causality Approach

##plugins.themes.bootstrap3.article.main##

  •   Hossam Attia

  •   Nader Alber

Abstract

In this paper, we aim to explore the causal relationship among the bank efficiency, competition, and concentration in the banking systems of 15 countries in the MENA region (Jordan, UAE, Bahrain, Algeria, Saudi Arabia, Kuwait, Morocco, Turkey, Tunisia, Oman, Palestine, Qatar, Lebanon, Egypt, and Mauritania), by modeling econometric panel data over 2008–2018. Banking efficiency is measured by Data Envelopment Analysis (DEA), while the level of competition is measured by the Boone Indicator, and the level of concentration is measured by the HHI index. Granger causality is used to estimate the relationship among these variables. Results indicate the presence of a significant effect of banking efficiency on banking competition and banking concentration.


Keywords: Efficiency, Competition, Concentration, DEA, Boone, HHI, Granger, MENA.

References

Ahi, K., & Laidroo, L. (2019) Banking market competition in Europe-financial stability or fragility enhancing? Quantitative Finance and Economics, 3(2).

Alber, N. (2013) Competitive Advantages and Performance of Stock Market: The Case of Egypt. International Journal of Economics and Finance, 5(11).

Alber, N. (2015) Determinants of Banking Efficiency: Evidence from Egypt. International Business Research, 8(8).

Alber, N. (2016) Banking Efficiency and Financial Stability: Which Causes Which? A Panel Analysis. Advances in Applied Economic Research, Springer, Chapter 7.

Alber, N., & Nabil, M. (2016) The Impact of Information Security on Banks’ Performance in Egypt. Available at SSRN: https://ssrn.com/abstract=2752070.

Worthington, A. C. (1998). The Determinants of Non-Bank Financial Institution Efficiency: A Stochastic Cost Frontier Approach. Applied Financial Economics, 8(3), 279–287. https://doi.org/10.1080/096031098333032.

Apergis, N., & Polemis, M. (2016) Competition and efficiency in the MENA banking region: a non-structural DEA approach. University of Piraeus, Greece, Taylor & Francis Group, ISSN: 0003-6846.

Bakour, A., & Gallali, M. (2014) Competition and Efficiency: Comparative Analysis between Islamic and Conventional Banks of MENA Region. International Journal of Business and Commerce, 5(03).

Banyen, K., & Biekpe, N. (2020). Financial integration, competition and bank efficiency: evidence from Africa’s sub-regional markets. Economic Change and Restructuring, 53(4), 495–518. https://doi.org/10.1007/s10644-019-09262-8.

Berger, A. N., & Humphrey, D. B. (1997). Efficiency of financial institutions: International survey and directions for future research. European Journal of Operational Research, 98(2), 175–212. https://doi.org/10.1016/s0377-2217(96)00342-6.

Bikker, J. A., & Haaf, K. (2013) Measures of Competition and Concentration in the Banking Industry: a Review of the Literature. Central Bank of the Netherlands.

Boone, J. (2008) A new way to measure competition. The Economic Journal, 118(August), 1245–1261.

Bukhalala, S. (2017), Competition between traditional banks and Islamic banks: a comparative applied study in Algeria during the period 2004-2014. PHD thesis, Faculty of Economic Sciences and Commercial Sciences, Kasdi Merbah University Ouargla.

Cândida, F. (2012) Bank efficiency, market concentration and economic growth in the European Union. School of Economics and Management. WP 38/2012/DE/UECE, ISSN N. 0874-4548.

Căpraru, B., Ihnatov, I., & Pintilie, N. L. (2020). Competition and diversification in the European Banking Sector. Research in International Business and Finance, 51, 100963. https://doi.org/10.1016/j.ribaf.2018.09.014.

Elfeituri, H. (2015) An Empirical Investigation of Market Structure, Determinants of Profitability, Competitiveness and Productivity in MENA Economies Banking Sector. Doctoral Thesis, Portsmouth Business School, University of Portsmouth.

Ferreira, C. (2012) Bank market concentration and efficiency in the European Union: A panel Granger causality approach. International Economics and Economic Policy, (Working Paper) ISSN 0874-4548.

González, L. O., Razia, A., Búa, M. V., & Sestayo, R. L. (2017) Competition, concentration and risk taking in Banking sector of MENA Countries. Research in International Business and Finance, 42(C), 591-604.

Hassan, S. (2019) Measuring the efficiency of commercial banks listed on the stock exchange using DEA data envelope analysis, PhD thesis, Faculty of Commerce, Ain Shams University.

Igbinosa, S., & Osagie, O. (2017) Banking sector on concentration and competition in Africa. Department of Banking and Finance, University of Benin, 19(1), 65-82.

Jadi, S. (2014), Measuring Operational Efficiency in Banking Institutions, Ph.D. Thesis, College of Economic Sciences and Commercial Sciences, Kasdi Merbah University Ouargla.

Mester L. J. (1994) Efficiency of bank in third federal reserve district, Financial Institutions Center the Wharton School, University of Pennsylvania. (Working Paper).

Mongi, G. (2015) The Extent of Competition and Its Impact on Bank Efficiency: Case of the Tunisian Commercial Banks. International Journal of Empirical Finance, 4(5).

Muazaroh, E., Husnan, S. & Hanafi, M. (2012) Determinants of Bank Profit Efficiency: Evidence from Indonesia. International Journal of Economics and Finance Studies, 4(2).

My Phan, H. T. (2015) Market Concentration, Bank Competition and Bank Efficiency in Emerging Asian Countries. World Business and Social Science Research, Doctoral Thesis, University of Western Sydney.

Phan, H., Anwar, S., Alexander. R., & My Phan, H. T. (2019) Competition, efficiency and Stability: An empirical study of East Asian commercial banks. North American Journal of Economics and Finance, 50, 100990.

Poshakwale, S. & Qian, B. (2015) “Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt. African Development Review, 23(1), 99-120.

Rahman, A., Rahim, A., & Rosman, R. (2013) Efficiency of Islamic Banks: A Comparative Analysis of MENA and Asian Countries. Journal of Economic Cooperation & Development, 34(1), 63-92.

Řepková, L., & Stavárek, D. (2014) Concentration and competition in the banking sector of Turkey. Silesian University, School of Business Administration, 16(36).

Shahooth, K., Battall, A. H., & Al-Delaimi, K. (2006), Using Data Envelopment Analysis to Measure Cost Efficiency with an Application on Islamic Banks. Scientific Journal of Administrative Development, (4), 134-156.

Sunil, S., Binsheng, Q. (2011) Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt. African Development Review, 23(1).

Tan, Y., & Floros, C. (2017). Risk, Competition and Efficiency in Banking: Evidence from China. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3010904.

Williams, J. (2012) Efficiency and market power in Latin American banking. Journal of Financial Stability, 8(4), 263-276.

Yu, Z. (2017) Efficiency and competition analysis in nine Asian banking industries. School of Business and Economics, Doctoral Thesis, Loughborough University.

Yue, P. (2017) Data Envelopment Analysis and Commercial Bank Performance: A Primer with Applications to Missouri Banks. Federal Reserve Bank of St. Louis Review, 74.

Downloads

Download data is not yet available.

##plugins.themes.bootstrap3.article.details##

How to Cite
Attia, H., & Alber, N. (2022). Bank Efficiency, Competition and Concentration in MENA Region Countries: A Granger Causality Approach. European Journal of Business and Management Research, 7(6), 35–42. https://doi.org/10.24018/ejbmr.2022.7.6.1688