Arab Banks during Tranquil and Turbulent Times: A Reflection of Arab Economies

Can Banks’ statistics, indicators, performance, and efficiency provide us with any indications about the causes of Arab Spring? This paper examines the 74 banks’ perspective on of Arab countries, where the Arab Spring occurred in Egypt, Libya, Syria, Tunisia and Yemen, versus 241 banks in other fifteen Arab countries. The paper analyzed the aggregate balance sheet items and income statement entries as well as recent trends in total assets, deposits, equity, and net income growth. The paper also examines the evolution of 315 Arab banks over 14 years from 1997 to 2010 of many ratios including Asset quality, capital, operations, and liquidity, and financial soundness. The results show that the majority of banks in the five countries were below the average in their performance. Their ranking, regionally and globally, in terms of the size, performance, and efficiency were weak. The regional and world ranking of these banks gives a glance about the business atmosphere and the economic conditions at these five countries. DOI: 10.5901/mjss.2015.v6n4p20

DO ICT INVESTMENTS IMPROVE BANKS PERFORMANCE IN OMAN? RESEARCH IN PROGRESS (35)

The Oman 2020 vision aims at the diversification of the national economy. The banking sector is playing a major role in diversification and economic development. Information and communications technologies (ICT) is vital for the development of a diversified and knowledge-based economy. Assessing the impact of ICT investments in the banking sector is critical for operational and strategic planning. Based on data gathered from 2001-2015 in three banks in Oman, this study found that ICT asset value is positively correlated with financial indicators such as operating income, profit before tax, and yearly profit; whereas it is negatively correlated with financial ratios such as return on average assets, return on average equity, and return on investment. This in-progress research provides some useful insights from an under-investigated region. However, it has some limitations, and further research is needed before any conclusions can be drawn about the impact of ICT on bank performance in Oman

Market power versus efficient-structure in Arab GCC banking

This paper evaluates the performance of the Arab GCC banking industry in the context of the Structure-Conduct-Performance hypothesis in the period 1993-2002. The paper uses panel estimation differentiating between bank fixed effects and country fixed effects. It examines the Relative-Market-Power and the Efficient-Structure hypotheses differentiating between the two by employing a non-parametric measure of technical efficiency, and finds that the banking industry in the Arab GCC countries is best explained by the mainstream SCP hypothesis. The empirical results do not find any support for the Hicks (1935) “Quiet Life” version of the market power hypothesis

An empirical investigation of efficiency, competitiveness, performance and market structure in the G.C.C. countries' banking industry

This thesis analyses the market structure, competitiveness, efficiency, and performance of the GCC countries' banking sector over the period 1993--2002. The study first examines the banking industry concentration using the concentration ratio of three largest banks (CR3) and Herfindahl-Hirschman Index (HHI) of concentration. Then, it assesses the competitive conditions using the Panzar-Rosse model. Third, it investigates the technical, pure technical and scale efficiency of commercial and Islamic banks using the Data Envelopment Analysis (DEA). In addition, change in banks' productivity growth was measured at this part by Malmquist Index. Finally, it investigates four different hypotheses explaining the relationship between market structure and performance using the Structure-Conduct-Performance (SCP) model. In relation to measurement of market concentration, it was found that the GCC banking industries are highly concentrated. Thus both indices indicated that these banking industries were ranging from 'some what' to 'very' concentrated markets. In terms of assessing competitive conditions, the results show that banks in Kuwait, Saudi Arabia and the UAE are earning their revenue under perfect competition. Bahraini and Qatari banks make their revenue in monopolistic competition. Oman's banks were making their total revenue under an 'undetermined' environment. Concerning technical efficiency and productivity growth, the results reveal that smaller banks exhibited superior performance in terms of overall technical efficiency than larger ones, mainly associated with diseconomies of scale. A decomposition of technical efficiency into pure technical and scale efficiency showed that large banks proved to be more successful in adopting best available technology (pure technical efficiency) while medium banks proved to be more successful in choosing optimal levels of output (scale efficiency). Islamic banks proved to be more successful in both the adoption of the best available technology and choosing optimal levels of output than commercial banks. Malmquist analysis showed downward shift in the average efficiency of banks. In last part, the thesis assesses the relevance of the Structure-Conduct-Performance (SCP) and the Relative-Market-Power (RMP) hypothesis and the Efficient-Structure (ES) hypotheses in the form of Technical efficiency or Scale efficiency to explain the performance of the banking industry in GCC countries and, finally, to test the existence of 'Quiet Life Hypothesis' in these markets. Results observed supported the Market Structure hypotheses and the quiet life effect was also observed. Thus, GCC banks were working in concentrated markets and were enjoying 'Quiet Life', therefore, gaining their profits in a more relaxed environmen

Market structure and competitive conditions in the Arab GCC banking system

This paper investigates the market structure of Arab GCC banking industry during the years of 1993 to 2002 using the most frequently applied measures of concentration kbank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI) and evaluates the monopoly power of banks over the ten years period using the “H statistic” by Panzar and Rosse. The results show that Kuwait, Saudi Arabia and UAE have moderately concentrated markets and are moving to less concentrated positions. The measures of concentration also show that Qatar, Bahrain and Oman are highly concentrated markets. The Panzar-Rosse H-statistics suggest that banks in Kuwait, Saudi Arabia and the UAE operate under perfect competition; banks in Bahrain and Qatar operate under conditions of monopolistic competition; and we are unable to reject monopolistic competition for the banking market in Oman

Market power versus efficient-structure in Arab GCC banking

This paper evaluates the performance of the Arab GCC banking industry in the context of the Structure-Conduct-Performance hypothesis in the period 1993-2002. The paper uses panel estimation differentiating between bank fixed effects and country fixed effects. It examines the Relative-Market-Power and the Efficient-Structure hypotheses differentiating between the two by employing a non-parametric measure of technical efficiency, and finds that the banking industry in the Arab GCC countries is best explained by the mainstream SCP hypothesis. The empirical results do not find any support for the Hicks (1935) “Quiet Life” version of the market power hypothesis

Market structure and competitive conditions in the Arab GCC banking system

This paper investigates the market structure of Arab GCC banking industry during the years of 1993 to 2002 using the most frequently applied measures of concentration kbank concentration ratio (CRk) and Herfindahl-Hirschman Index (HHI) and evaluates the monopoly power of banks over the ten years period using the “H statistic” by Panzar and Rosse. The results show that Kuwait, Saudi Arabia and UAE have moderately concentrated markets and are moving to less concentrated positions. The measures of concentration also show that Qatar, Bahrain and Oman are highly concentrated markets. The Panzar-Rosse H-statistics suggest that banks in Kuwait, Saudi Arabia and the UAE operate under perfect competition; banks in Bahrain and Qatar operate under conditions of monopolistic competition; and we are unable to reject monopolistic competition for the banking market in Oman