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Jean-michel Sahut and Medhi Mili
''Are Mergers a Solution to Bank Distress in MENA Countries? ''
( 2010, Vol. 30 No.4 )
This paper studies bank distress in MENA countries and investigates whether mergers are commonly considered as a solution for resolving individual bank distress. Both specific bank levels and macro variables are deployed to predict banking distress. In line with other recent papers, we challenge the view that specific bank indicators such as CAMEL ratings and bank size are significant determinants of bank distress. Our findings indicate that monetary policy indicators do not appear to affect bank distress in MENA countries. Overall, we suggest that bank capitalization and regulatory supervision need to be given sufficient consideration to avoid individual distress in the banking sector. Our empirical study shows that 67% of distressed banks in our sample are involved in merger transactions and that poor financial status systematically increases the likelihood of a bank being involved in a merger. Distressed state-owned banks and large-sized banks are less likely to be targets for merger transactions. However, global economic conditions do not seem to affect the decision of distressed banks to initiate a merger policy.
Keywords: banking distress, bank mergers, CAMEL rating, financial stability, MENA
JEL: G2 - Financial Institutions and Services: General
G3 - Corporate Finance and Governance: General
Manuscript Received : Apr 29 2010 Manuscript Accepted : Oct 07 2010

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