Nada Kobeissi.PDF

The importance of restructuring and privatizing the financial sector has received renewed attention in the ongoing effort of revitalizing developing economies A growing research literature has underscored the importance of banking and the financial sector to economic growth. Several studies found positive relationship between financial sector development and levels of income and growth [Levine, 1997; Khan & Senhadji, 2000]. Further time series evidence suggest that the causality runs from finance to While the restructuring initiatives in the Middle East and North Africa are not as vibrant as those taking places in Eastern Europe and part of Asia, nevertheless several MENA countries are witnessing new eras in privatization, bank regulation, market-oriented financial institutions, and entries of privately owned banks of different organizational structure (Omran, 2004). Within the region, countries that have been most successful in privatizing the ir banking institutions have also been involved in opening up their markets to foreign participants. For example, Lebanon took the lead in the late 1960s in welcoming foreign banks. Later, similar approaches were taken by Bahrain and Jordan. Within a short period of time, the foreign banking sectors in these countries became a dominant force in the financial service industry as well as in the economy. These latest developments in terms of privatization and foreign entry, underscore the need to examine their bearing on bank performance in the MENA region. The aim of this paper is therefore two fold: first is to fill a gap in the banking literature by focusing on the banking sector in the MENA region. Financial researchers have paid little attention to MENA countries despite the growing role of banks, and the current changes that are taking place in that region. In fact, a recent paper documenting studies on bank performance in various countries of the world excluded all countries in the region except for Turkey (Berger and 3 Humphrey, 1997). Among the few papers that did examine the performance of banks in MENA countries, the majority spotlighted one country or lacked comparative or regional analysis (El-The second aim of this paper is to gain an insight and understanding of a significant determinant mostly associated with firm performance, namely ownership structure (Gedajlovic and Shapiro, Ownership structure can be defined along 2 attributes: concentration and identity of the owner(s) is important in the context of non-bank firms —but becomes crucial in the context of a bank (Boubakri, et al.) and is …