Institutional Environment and Bank Capital Ratios - Economic Research Forum (ERF)

Institutional Environment and Bank Capital Ratios

Tammuz Alraheb, Christina Nicolas and Amine Tarazi

October, 2017


31 pages

G3. Corporate Finance and Governance
G2. Financial Institutions and Services

We investigate the influence of the institutional environment on bank capital levels. Using a sample of 183 banks operating in the MENA region for the period 2004 to 2014, we find that low corruption levels, high political stability, as well as high economic and financial freedom are associated with higher capital adequacy levels. The effect of institutional factors on bank capital ratios is also more pronounced for conventional versus Islamic banks, for listed banks and for non-government owned banks.


نقوم في هذه الورقة بالتحقيق في تأثير البيئة المؤسسية على مستويات رأس المال المصرفي. وباستخدام عينة من 183 بنكا تعمل في منطقة الشرق الأوسط وشمال أفريقيا للفترة من 2004 إلى 2014، نجد أن انخفاض مستويات الفساد، والاستقرار السياسي المرتفع، والحرية الاقتصادية والمالية المرتفعة ترتبط بزيادة مستويات كفاية رأس المال. كما أن تأثير العوامل المؤسسية على نسب رأس المال المصرفي هو أكثر وضوحا بالنسبة للبنوك التقليدية مقابل البنوك الإسلامية والبنوك المدرجة والبنوك غير الحكومية

Tammuz Alraheb

Christina Nicolas

Research Fellows

Amine Tarazi

Professor of Economics, University of Limoges, France



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