Competition–banking stability: the moderating role of government intervention quality in North African countries
ISSN: 1526-5943
Article publication date: 28 February 2023
Issue publication date: 10 March 2023
Abstract
Purpose
This study investigates how bank competition affects financial stability and whether government intervention contributes to shaping this relationship in North African countries.
Design/methodology/approach
A review of the literature on the subject was conducted, combined with an empirical analysis that used a two-step system generalized method of moments (GMM) and a sample of 45 banks operating in North African countries over the period 2005–2019.
Findings
The findings reveal a quadratic relationship between competition and banking stability in North African countries. Competition–stability view and competition–fragility view could be applied at the same time for North African banks. Additionally, in this context, results highlight a negative impact of government intervention on financial stability in a competitive financial sector. North African banks operating in a high government intervention quality environment tend to engage in high-risk investments. Robustness checks with alternative measures of competition and banking stability also show consistent results.
Originality/value
To the authors’ knowledge, this is the first time that the North African context has been explored to determine the role of the quality of government intervention in the relationship between competition and banking system fragility. This paper seeks to cover the shadow field in existing literature through further new information. Thus, it contributes to the emerging market banking literature by showing that both high and low levels of competition can improve financial stability in North African countries. Moreover, it expands its contribution by displaying the moderator effect of intervention quality on the bank competition–stability relationship.
Keywords
Acknowledgements
The authors would like to express sincere gratitude to the editor and anonymous reviewers for their insightful comments and suggestions, which were useful in substantially improving the quality of the paper. Any remaining errors are the authors’.
Data availability statement: Data sharing is not applicable to this article as no new data were created or analyzed in this study.
Conflicts of interest: The authors declare no conflict of interest.
Citation
Basty, N. and Ghazouani, I. (2023), "Competition–banking stability: the moderating role of government intervention quality in North African countries", Journal of Risk Finance, Vol. 24 No. 2, pp. 244-268. https://doi.org/10.1108/JRF-06-2022-0166
Publisher
:Emerald Publishing Limited
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