The impact of banking competition on the stability of commercial banks: empirical evidence from the Gulf Cooperation Council countries

Abstract

This study aimed to measure the prevailing competition between commercial banks and their stability rate, using a sample of 61 commercial banks listed in the stock markets operating in )GCC) countries, and balanced annual data extending from 2011 to 2020. The experimental part of the study was adopted on the analysis of multiple regressions of the Panel data, using panel- corrected standard errors (PCSE) method. The results showed that the competition between commercial banks operating in the countries under study “measured by the concentration index (CR3) of market share” is low, and some of them are away from the full of competition and are highly concentrated markets and non-competitive markets, the empirical results suggest that there is a significant negative impact of concentration ratio (CR3) on the stability of commercial banks, this result supports the “competition-Stability” hypothesis, which suggests that competition between commercial banks may have a positive impact on bank stability. Based on the findings of the study, the study recommends increasing attention to financial reforms, liberalizing banking services, and considering facilitating the entry of new banks to the market and encouraging mergers to take advantage of competition, given its importance in strengthening and stability of the banking sector.