Abstract:

In light of the ongoing Covid-19 pandemic, this paper explores the effects of funding liquidity and the COVID-19 pandemic on bank profitability using a panel data set of 117 unlisted banks headquarters in 13 MENA countries from 2015 to 2020. The estimation results from a dynamic GMM and a dynamic Panel Threshold Regression indicate that during a pandemic, funding liquidity will negatively affect bank profitability; additionally, the relationship between funding liquidity and bank profitability is nonlinear and characterized by the presence of optimal funding liquidity thresholds equal to 46.7%. More precisely, we discovered that increasing funding liquidity above the threshold greatly enhances bank profitability and vice versa below the optimal threshold. In order to preserve their stability, MENA Banks are urged to constantly monitor the optimal NSFR ratio at (47%). The study is expected to assume significance for policymakers as it provides empirical evidence of how funding liquidity has reinforced bank profitability during the COVID pandemic.

Keywords:

NSFR; bank profitability; covid-19; dynamic panel threshold; non-linearity.

JEL Classification:

G01; G20; G21; G28; G32; G33.

How to Cite:

Mohamed Amroony, M.H. Yahya, F Kamarudin, NH Ab Razak and S H Law. What Funding Threshold Hampers Bank Performance in MENA? Evidence from Pre and During the COVID-19 Era. [ref]: vol.21.2023. available at: https://refpress.org/ref-vol21-a277/