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English Title

Financial Structure and Systemic Risk: Evidence from Selected MENA Region Countries

Keywords

Financial Structure, Systemic Risk, Bank-based system, Market-based sysetm, Non-linear, MENA

Disciplines

Arts and Humanities | Business

Abstract

Against the context of the consecutive world financial crisis, this paper aims to evaluates the merits of market-based against bank-based financing by analyzing the correlation between financial structure and systemic risk of eleven countries within the MENA region. Within the study three hypotheses are tested; first, if financial structure and systemic risk are significantly related, second, if this relation is non-linear relationship and the third one is if bank financing doesn’t contribute to systemic risk above the threshold financial structure value. To our knowledge no paper has addressed this issue in the selected countries. This paper uses a balanced panel of 253 observations for the period between 1995 and 2018 to perform the empirical analysis. Our results from the fixed effect panel regression, confirm that this relation is significant between financial structure and systemic risk, supports a non-linear relationship and has an inflection point as proved by the cubic model regression. In light of these results, stock-markets are more resilient to systemic risk and non-interest income activities offered by the banks are considered to be a source of risk.

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