Amer N. Bani Yousef¹, Roshaiza, Taha^1♣, Siti Nurain Muhmad¹ and Ahmad Firdhauz, Zainul Abidin²

¹Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu

² Centre of Transformation, Strategic Planning and Risk, Universiti Malaysia Terengganu

ABSTRACT

This study investigated the relationship between market risk and bank financial performance in 14 Middle East and North African (MENA) countries, employing quantile regression estimations. The data of 135 banks in the MENA region from 2015 to 2019 were collected from the Bankscope and World Bank. The OLS results showed that market risk was positively associated with bank performance. Quartile regression also indicated that only banks in the median and 90% quartiles had a positive association between market risk and performance. This proved that MENA banks have high performance when exposed to high market risk, in line with the perspectives of risk-return trade-off views. This implies that banks are risk-takers in conducting business in the highly competitive market in the MENA region. Banks tend to provide various financial services, which can secure generating returns. Besides, the findings also provide insight into banks’ preference in utilizing leverage to generate profits. The findings provide a cogent argument to the bankers and regulators in MENA region on the role and impact of market risk towards banks financial stability.

Keywords: Market risk, financial performance, OLS, quantile regression.

^♣Corresponding Author: Roshaiza Taha; Faculty of Business, Economics and Social Development, Universiti Malaysia Terengganu, 21030 Kuala Nerus, Terengganu; Email: This email address is being protected from spambots. You need JavaScript enabled to view it.