How multiple large shareholders affect bank profitability under the dispersion and the coalition hypotheses? An insight from the MENA region

• Published in: International journal of managerial finance Vol. 17; no. 1; pp. 1 - 24
• Main Authors: Rim Boussaada, Hakimi, Abdelaziz
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Group Publishing Limited 20.01.2021
• Subjects: Banking industry; Banks; Bargaining; Corporate governance; Generalized method of moments; Hypotheses; Literature reviews; Return on assets; Stockholders; MENA countries
• ISSN: 1743-9132; 1758-6569
• DOI: 10.1108/IJMF-05-2019-0201

PurposeThe aim of this paper is to examine whether multiple large shareholders and their interactions affect bank profitability in the MENA region.Design/methodology/approachTo achieve this goal, we used a sample of conventional banks in the MENA region observed during the period 2004–2015. We performed the System Generalized Method of Moment as the empirical approach.FindingsEmpirical results indicate that under the dispersion hypothesis, multiple large shareholders (MLS) tend to reduce bank profitability for both return on assets (ROA) and return on equity (ROE). However, under the alignment of interests’ hypothesis, coalition between the first and the second largest shareholder increases bank profitability only for ROA. We also find that an additional large shareholder, beyond the two largest, reduces bank return equity.Originality/valueTo the best of our knowledge, to date, there is no study that investigates the effect of MLS and the bank profitability in the MENA region. Indeed, this study shows the importance of considering ownership composition among large shareholders in banking studies.