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<p>We analyze the complex relationship between bank competition, institutional quality, and stability across sample of 115 banks from the MENA region over the period 2007–2024 and accounting for the role of Islamic banks, the moderating role of ownership structure, degree of concentration, and structural shocks using the Panel corrected standard error (PCSE) and generalized method of moments (GMM) methodologies. The results provide strong support for the competition-fragility hypothesis. High market power decreases stability and increases non-performing loans, and market concentration increases stability through a more efficient monitoring system, economies of scale, and relationship lending. Whereas institutional quality strengthens resilience and reduces risk, it simultaneously increases competitive pressure, consistent with the competition–discipline–risk channel. Ownership structure and concentration further influence the stability-risk relationship, with foreign and more concentrated banks being more resilient than state-owned banks and more concentrated than domestic-foreign entities. Structural shocks amplified the destabilizing effect of competition but were mitigated by increases in concentration. Our findings highlight the interactions of market structure, governance, ownership, and shocks and provide policy implications to further stabilize banking systems in developing, politically complex contexts.</p>

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How institutional quality shapes the impact of competition on financial stability: evidence from the MENA region

  • 期刊论文

  • 发表日期：

    2026年5月15日

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  • Ahmed Rashed,
  • Dexiang Wu,
  • Asmaa Hussein,
  • Dina Mohsen,
  • Aya Abdelbaky,
  • Manar Omar

摘要

We analyze the complex relationship between bank competition, institutional quality, and stability across sample of 115 banks from the MENA region over the period 2007–2024 and accounting for the role of Islamic banks, the moderating role of ownership structure, degree of concentration, and structural shocks using the Panel corrected standard error (PCSE) and generalized method of moments (GMM) methodologies. The results provide strong support for the competition-fragility hypothesis. High market power decreases stability and increases non-performing loans, and market concentration increases stability through a more efficient monitoring system, economies of scale, and relationship lending. Whereas institutional quality strengthens resilience and reduces risk, it simultaneously increases competitive pressure, consistent with the competition–discipline–risk channel. Ownership structure and concentration further influence the stability-risk relationship, with foreign and more concentrated banks being more resilient than state-owned banks and more concentrated than domestic-foreign entities. Structural shocks amplified the destabilizing effect of competition but were mitigated by increases in concentration. Our findings highlight the interactions of market structure, governance, ownership, and shocks and provide policy implications to further stabilize banking systems in developing, politically complex contexts.