Title: Efficiency, capital and risk in banking industry: the case of Middle East and North Africa (MENA) countries

Authors: Christos Lemonakis; Fotini Voulgaris; Konstantinos Vassakis; Stylianos Christakis

Addresses: Technological Educational Institute of Crete, Agios Nikolaos Branch, P.O. Box 128, 72100 Agios Nikolaos, Greece ' Technological Educational Institute of Crete, Agios Nikolaos Branch, P.O. Box 128, 72100 Agios Nikolaos, Greece ' University of Portsmouth, Portsmouth, UK ' University of Portsmouth, Portsmouth, UK

Abstract: The purpose of this study is to measure the efficiency of the banking industry in the Middle East and North Africa (MENA) region and to investigate its effect on capitalisation and risk during the period: 2003-2012. The study, based on banks' financial data, attempts to present new evidence on the relationship between efficiency, capital and risk of MENA region's banking industry, using external and internal to the firm factors and panel data econometric modelling. This is the first study that investigates the relationships between efficiency, capital and risk in banking industry of MENA region. The results indicate that bank capitalisation is positively related to efficiency and profitability and negatively to size, amount and quality of loans and risk measured with Altman's Z-score. Efficiency and risk are also negatively related. The findings can lead to policy implications for banks' managers in order to facilitate the increase of efficiency and decrease of risk in the financial institutions in this region.

Keywords: efficiency; DEA; data envelopment analysis; MENA countries; risk; Z-score; bank capitalisation; banking industry; Middle East; North Africa; profitability; loans quality; loans amount; financial institutions.

DOI: 10.1504/IJFERM.2015.074042

International Journal of Financial Engineering and Risk Management, 2015 Vol.2 No.2, pp.109 - 123

Accepted: 29 Aug 2015
Published online: 03 Jan 2016 *

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