Do Competition, Size, and Macro Variables Impact Bank Risk?

Authors

  • Md Nazmul Islam Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh Author https://orcid.org/0000-0003-4628-1330
  • Md. Abdul Halim Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh Author https://orcid.org/0000-0001-7172-3650
  • Md. Rostam Ali Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh Author

DOI:

https://doi.org/10.69728/jst.v10.27

Keywords:

Competition, Bank Risk-taking, Economic Growth, Profitability, MENA Countries

Abstract

The paper investigates the correlation between bank competition, performance, and risk-taking behavior in MENA economies. Furthermore, it explores the risk level associated with dual banking as well as the bidirectional connectedness of competition and jeopardy in terms of size, GDP, and inflation rate. This work employs Generalised Method Moments (GMM) for regression findings and Two-Stage Least Squares (2SLS) for robustness tests. It uses an unbalanced panel dataset from 256 banks and 14 MENA countries from the year 2011 to 2022. According to the study’s findings, financial stability improves, and bank risk-taking decreases with less bank competition. The findings of this investigation corroborate the competition fragility theory. The competition square concept suggests that in a market with competition, risk will eventually rise. In terms of economic progression, risk-taking behavior is exactly the reverse of bank competition. Again, the finding shows that good performance reduces the bank’s risk, finally turning to greater financial stability. Furthermore, there is a substantial association between inflation rates and the extent of banks’ risk-taking activity. In a competitive market scenario, MENA countries inflation rate risk-taking behavior initially increases and then declines over time, while bank size exhibits a similar trend in the near term. When the inflation rate rises, banks’ risk-taking behavior initially decreases and then rises over time. This research will provide policymakers in MENA nations with a better grasp of how to establish strategies that benefit the banking environment.

Author Biographies

  • Md Nazmul Islam, Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh

    Dr. Md Nazmul Islam has completed his Ph.D. degree
    from Huazhong University of Science and Technology,
    Wuhan, China. He received his MBA & BBA Degrees in the
    Department of Accounting and Information Systems from the
    University of Rajshahi, Bangladesh. His primary research
    interest is in Financial Economics, Risk Management,
    Corporate Taxation, Corporate Governance, Technology and
    Innovation, etc. His research papers have been published in
    esteemed journals. Besides, he is a regular reviewer of the
    Journal of Financial Regulation and Compliance, Journal of
    Economics Finance and Administrative Science, FIIB
    Business Review, etc. Md Nazmul Islam can be reached at : E- mail: nusfatjahan@gmail.com

  • Md. Abdul Halim, Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh

    Md. Abdul Halim has been working as a faculty of MBSTU since January 2024. He is a Former Lecturer (Accounting), at the Department of Business Administration, German University Bangladesh, and the Department of Business Administration, Institute of Science Trade and Technology, Dhaka. He also had a Research Assistant, at the Institute for Advanced Research, United International University, Dhaka. He received his MBA & BBA (Accounting and Information Systems) from the Department of Business Administration, Mawlana Bhashani Science and Technology University, Bangladesh. His primary research interest is in Financial Economics, Risk Management, Corporate Governance, Technology and Innovation. MAH has a good number of manuscripts including ABS-1, ABDC, SSCI, Web of Science, and Scopus.  https://orcid.org/0000-0001-7172-3650.

  • Md. Rostam Ali, Department of Accounting, Mawlana Bhashani Science and Technology University, Santosh, Tangail-1902, Bangladesh

    Dr. Md. Rostam Ali is an Associate Professor of Accounting Department at Mawlana Bhashani Science and Technology University. He obtained BBA & MBA degrees from University of Rajshahi Under Finance and Banking Department. After that, he obtained PhD degree from Institute of Bangladesh Studies, University of Rajshahi. He joined MBSTU faculty in April 2013. His primary research interests are Capital Market, Capital Structure, SME Financing, Agricultural Restructuring etc. He has published more than 20 articles in national and international journals having ABDC, ESCI & Scopus indexing. He has also experience of present paper in national and international conferences. 

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Published

30-06-2024

Issue

Vol. 10 No. 1 (2024): MBSTU Journal of Science and Technology

Section

Research Articles

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Copyright (c) 2024 Md Nazmul Islam, Md. Abdul Halim, Md. Rostam Ali (Author)

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This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Islam, M. N. ., Halim, M. A., & Ali, M. R. . (2024). Do Competition, Size, and Macro Variables Impact Bank Risk?. MBSTU Journal of Science and Technology, 10(1), 43-57. https://doi.org/10.69728/jst.v10.27