The Determinants Of Capital Flight: Evidence From MENA Countries

This paper examines the determinants of capital flight in seven Middle East and North Africa (MENA) countries during the period of 1981-2008. The results are robust to four econometrics techniques: Ordinary least Squares, Fixed effects, Random Effects, and Seemingly Unrelated Regression Model. The empirical findings indicate that the capital flight in MENA countries is driven mainly by lag capital flight, external debt, foreign direct investment, real GDP growth rate and uncertainty. Based on these results, the paper recommends that governments in these countries should manage their external debt efficiently, and stabilize their monetary and macroeconomic policies in order to staunch capital flight

Corruption, lending and bank performance

This paper uses a sample of 7235 banks from 160 countries between 2000 and 2016 to investigate the link between corruption, lending and bank performance. It considers both country- and bank-level corruption. The study finds that while corruption increases bank lending, it has an adverse impact on bank profits and risks (credit, solvency and distance to default). Corporate lending is found to be most influenced by corruption. Bank-level corruption influences bank performance in both developed and developing countries whereas country-level corruption has a lesser effect on lending in developing countries. The study also finds that greater bank competition, market concentration and improved regulatory environments reduce the effect of corruption on bank lending and performance. Policy makers should focus on enhancing regulatory rules and institutions in order to deal with the adverse impact of corruption on bank performance

Bank concentration, institutional quality, and economic growth

Purpose: This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration. Design/methodology/approach: The sample of our study covers 15 Middle East and North African (MENA) countries over the period 1996-2010. The results are estimated based on static and dynamic panel data analysis. Findings: The results reveal a positive and significant relationship between economic growth and each banking concentration and institutional quality. The results support the argument that banking concentration and institutional quality are matters for growth in MENA countries. The results also indicate that the interaction variable between concentration and institutional quality is negative and significant. Research limitations/implications: Building on Petersen and Rajans' (1995) argument, this study suggests that in the absence of an appropriate level of institutional quality, banks in MENA region can depend on their market power to protect their benefits. This can be achieved by building long-term relationships with their borrowers to provide continuing credit and subsequently enhancing economic growth. Practical implications: Under the low level of institutional quality in MENA countries, regulators and decision-makers should thoroughly think before imposing any policy that aims to restrict banking market power because such action could harm the economy. Social implications: In developing countries, banking concentration may have a positive impact on the economy. This outcome may lead to an improvement in the standard of living for the society. Originality/value: This is the first known study, to the best of our knowledge, that examines the role of institutional quality in shaping the relationship between economic growth and banking concentration in MENA countries. The authors opted to select MENA countries' data because they generally reflect an institutional setting similar to many developing countries. Therefore, the results could be applicable in many developing economies and will encourage other researchers to investigate this proposition. 2016, Emerald Group Publishing Limited.Scopu

Risk spillover from crude oil prices to GCC stock market returns: New evidence during the COVID-19 outbreak

In this study, we examine oil price extreme tail risk spillover to individual Gulf Cooperation Council (GCC) stock markets and quantify this spillover's shift before and during the COVID-19 pandemic. A dynamic conditional correlation generalized autoregressive heteroscedastic (DCC- GARCH) model is employed to estimate three important measures of tail dependence risk: conditional value at risk (CoVaR), delta CoVaR (CoVaR), and marginal expected shortfall (MES). Using daily data from January 2017 until May 2020, results point to significant systemic oil risk spillover in all GCC stock markets. In particular, the effect of oil price systemic risk on GCC stock market returns was significantly larger during COVID-19 than before the pandemic. Upon splitting COVID-19 into two phases based on severity, we identify Saudi Arabia as the only GCC market to have experienced significantly higher exposure to oil risk in Phase 1. Although all GCC stock markets received greater oil systemic risk spillover in Phase 2 of COVID-19, Saudi Arabia and the United Arab Emirates appeared more vulnerable to oil extreme risk than other countries. Our empirical findings reveal that investors should carefully consider the extreme oil risk effects on GCC stock markets when designing optimal portfolio strategies, minimizing portfolio risk, and adopting dynamic diversification process. Policymakers and regulators should also enact awareness, oversight, and action plans to minimize adverse oil risk effects. 2021 Elsevier Inc.Scopu

Are Investors Concerned with Stock Market Upgrades? Evidence from Multivariate Framework Analysis

This study aims to examine the return and volatility responses to the announcement of stock market upgrades. It measures the direct effects of the recent Morgan Stanley Capital International (MSCI) upgrade of the Qatar, Dubai, and Abu Dhabi stock exchanges from frontier to emerging markets by applying a nontraditional dummy variable event study using multivariate BEKK and DCC GARCH models. The results show clear evidence that contradicts the free information hypothesis and supports the price pressure hypothesis. Initially, the MSCI upgrade led to positive feedback from active investors due to the belief that this announcement will attract foreign institutional investors who play a vital role in improving the market's performance. Copyright 1 Taylor & Francis Group, LLC.Scopu

Does openness enhance financial sector development? The experience of the arab world

Purpose - The purpose of this paper is to examine if the simultaneous openness to trade and capital account can promote financial sector development. Design/methodology/approach - Based on a sample of 12 Arab countries over the period from 1985 to 2011, the data were analyzed using the dynamic and static panel data analysis. In particular, the authors apply three estimate techniques: the generalized method of moments, fixed effects and random effects. Findings - The empirical results do not support the simultaneous openness hypothesis. Even trade and financial openness have an important separate role in enhancing financial sector development; their interaction effect is harmful. This empirical evidence indicates that opening Arab countries to both trade and capital account will not necessarily promote financial sector development. Research limitations/implications - Some Arab countries are not included in the study sample because of the lack of data. Practical implications - The main implication of this study is: opening Arab countries for trade and capital account at the same time will not improve the development of financial sector. Social implications - The paper examines one of the most important issues in developing countries; where, the people want to know if the country openness to trade and finance will generate a social and economic welfare for them. Originality/value - This study can be considered as one of the rare studies that examine the simultaneous openness issue in the developing countries. It recommends regulators and policy makers to take gradual steps toward adopting trade and financial openness in the Arab countries. Emerald Group Publishing Limited.Scopu

Bank concentration, institutional quality, and economic growth: Empirical evidence from MENA countries

Purpose: This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration. Design/methodology/approach: The sample of our study covers 15 Middle East and North African (MENA) countries over the period 1996-2010. The results are estimated based on static and dynamic panel data analysis. Findings: The results reveal a positive and significant relationship between economic growth and each banking concentration and institutional quality. The results support the argument that banking concentration and institutional quality are matters for growth in MENA countries. The results also indicate that the interaction variable between concentration and institutional quality is negative and significant. Research limitations/implications: Building on Petersen and Rajans' (1995) argument, this study suggests that in the absence of an appropriate level of institutional quality, banks in MENA region can depend on their market power to protect their benefits. This can be achieved by building long-term relationships with their borrowers to provide continuing credit and subsequently enhancing economic growth. Practical implications: Under the low level of institutional quality in MENA countries, regulators and decision-makers should thoroughly think before imposing any policy that aims to restrict banking market power because such action could harm the economy. Social implications: In developing countries, banking concentration may have a positive impact on the economy. This outcome may lead to an improvement in the standard of living for the society. Originality/value: This is the first known study, to the best of our knowledge, that examines the role of institutional quality in shaping the relationship between economic growth and banking concentration in MENA countries. The authors opted to select MENA countries' data because they generally reflect an institutional setting similar to many developing countries. Therefore, the results could be applicable in many developing economies and will encourage other researchers to investigate this proposition. 2016, Emerald Group Publishing Limited.Scopu

Does openness enhance financial sector development? The experience of the Arab world

Purpose - The purpose of this paper is to examine if the simultaneous openness to trade and capital account can promote financial sector development. Design/methodology/approach - Based on a sample of 12 Arab countries over the period from 1985 to 2011, the data were analyzed using the dynamic and static panel data analysis. In particular, the authors apply three estimate techniques: the generalized method of moments, fixed effects and random effects. Findings - The empirical results do not support the simultaneous openness hypothesis. Even trade and financial openness have an important separate role in enhancing financial sector development; their interaction effect is harmful. This empirical evidence indicates that opening Arab countries to both trade and capital account will not necessarily promote financial sector development. Research limitations/implications - Some Arab countries are not included in the study sample because of the lack of data. Practical implications - The main implication of this study is: opening Arab countries for trade and capital account at the same time will not improve the development of financial sector. Social implications - The paper examines one of the most important issues in developing countries; where, the people want to know if the country openness to trade and finance will generate a social and economic welfare for them. Originality/value - This study can be considered as one of the rare studies that examine the simultaneous openness issue in the developing countries. It recommends regulators and policy makers to take gradual steps toward adopting trade and financial openness in the Arab countries. Emerald Group Publishing Limited.Scopu