{"title":"Bank performance, capital and size: a comparative analysis in MENA and EU","authors":"Marwan Al-Zoubi, Mais Sha’ban","doi":"10.1007/s40822-023-00248-6","DOIUrl":null,"url":null,"abstract":"<p>The debate on optimal bank capital and size and their association with bank performance is still ongoing and high on policy makers’ agenda. This study analyzes the impact of capital and size on bank performance for 1053 banks operating in the EU and MENA regions over the period 2009–2020. The results show that capital is an important determinant of bank performance as it is highly significant in both regions; however, banks’ performance in MENA seems to be more responsive to changes in the capital ratios. Further, while bank size has a positive non-linear relationship with profitability in the EU region, it does not seem to have a significant impact in the MENA region. This study contributes to the literature by providing a strong empirical evidence that more capital is associated with higher profitability in regions characterized by different levels of development, contrary to the bankers’ belief that capital is costly. Regulators may find this conclusion to be useful and in line with their objective of boosting bank resilience and performance.</p>","PeriodicalId":45064,"journal":{"name":"Eurasian Economic Review","volume":"208 1","pages":""},"PeriodicalIF":2.5000,"publicationDate":"2023-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Eurasian Economic Review","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1007/s40822-023-00248-6","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
The debate on optimal bank capital and size and their association with bank performance is still ongoing and high on policy makers’ agenda. This study analyzes the impact of capital and size on bank performance for 1053 banks operating in the EU and MENA regions over the period 2009–2020. The results show that capital is an important determinant of bank performance as it is highly significant in both regions; however, banks’ performance in MENA seems to be more responsive to changes in the capital ratios. Further, while bank size has a positive non-linear relationship with profitability in the EU region, it does not seem to have a significant impact in the MENA region. This study contributes to the literature by providing a strong empirical evidence that more capital is associated with higher profitability in regions characterized by different levels of development, contrary to the bankers’ belief that capital is costly. Regulators may find this conclusion to be useful and in line with their objective of boosting bank resilience and performance.
期刊介绍：
The mission of Eurasian Economic Review is to publish peer-reviewed empirical research papers that test, extend, or build theory and contribute to practice. All empirical methods - including, but not limited to, qualitative, quantitative, field, laboratory, and any combination of methods - are welcome. Empirical, theoretical and methodological articles from all fields of finance and applied macroeconomics are featured in the journal. Theoretical and/or review articles that integrate existing bodies of research and that provide new insights into the field are highly encouraged. The journal has a broad scope, addressing such issues as: financial systems and regulation, corporate and start-up finance, macro and sustainable finance, finance and innovation, consumer finance, public policies on financial markets within local, regional, national and international contexts, money and banking, and the interface of labor and financial economics. The macroeconomics coverage includes topics from monetary economics, labor economics, international economics and development economics.
Eurasian Economic Review is published quarterly. To be published in Eurasian Economic Review, a manuscript must make strong empirical and/or theoretical contributions and highlight the significance of those contributions to our field. Consequently, preference is given to submissions that test, extend, or build strong theoretical frameworks while empirically examining issues with high importance for theory and practice. Eurasian Economic Review is not tied to any national context. Although it focuses on Europe and Asia, all papers from related fields on any region or country are highly encouraged. Single country studies, cross-country or regional studies can be submitted.
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