Non-performing loans (NPLs, henceforth) represent the main challenge that jeopardizes the steadiness of the banking sector. The purpose of this study is to explore the main determinants of banks' non-performing loans in emerging markets. To better understand the hidden aspects of these determinants, the current research employs a panel approach and dynamic data estimates through Generalized Methods of Moments (GMM) using data of 53 banks listed in five Middle East and North African (MENA) emerging markets between 2000 and 2019. This study documents that GDP growth, unemployment, bank capitalization, bank performance, bank operating inefficiency, bank ownership concentration, inflation, sovereign debt and bank size are the main determinants of NPLs, whereas, loan growth, bank diversification and interbank competition were found to have an insignificant impact on NPLs. This analysis is motivated by the recent economic changes surrounding the financial systems in emerging countries with the aim to provide new evidence and insights. The results show that non-performing loans can be explained mainly by macroeconomic variables and bank-specific factors with interesting differences in their quantitative impacts. This study has substantial theoretical and practical contributions. It shows strong evidence on the leading indicators of future problematic loans. The identification of these factors would help regulators address appropriate interventions, design ample credit policies and adopt adjusted prudential regulations. Further, it empowers the regulatory authorities with an in-depth understanding of credit risk determinants, allowing them to place emphasis on risk management systems and procedures that minimize borrowers' default in order to avert future financial instability. Our findings underscore the necessity of closely monitoring bank-specific factors along with reinforcing country level mechanisms to reduce banks’ credit risk.

Purpose: This study delves into the critical issue of banks' stability and profitability, which are crucial elements for fostering economic growth and preserving depositor confidence. Specifically, we scrutinize the impact of geopolitical risks on the profitability and solvency of banks operating in emerging economies across the Middle East and Africa.Design/methodology/approach: Employing a two-step Generalized Method of Moments (GMM) approach, we analyze a comprehensive dataset comprising 125 banks spanning 13 emerging economies in the Middle East and Africa, covering the period from 2003 to 2019.Findings: Our study reveals a significant sensitivity of Middle Eastern banks to geopolitical risks, wherein effective anticipation or adaptation to these risks positively influences bank performance. Conversely, the impact of geopolitical risk on African banking profitability appears inconclusive and statistically insignificant. These nuanced findings underscore the complex interplay between geopolitical dynamics and financial performance in diverse regional contexts, with implications for policymakers and industry stakeholders.Practical implications: Our findings underscore the need for nuanced policy responses and risk management strategies tailored to the unique challenges posed by geopolitical dynamics in emerging markets. Furthermore, they highlight the importance of continued research efforts to deepen our understanding of these complex interactions and inform more effective decision-making in the financial sector.Originality/value: Amidst growing recognition of the importance of geopolitical risks in financial markets, empirical studies exploring their precise impact on bank performance remain scarce. This study fills this gap by offering a pioneering investigation into the influence of geopolitical risks on bank profitability and solvency, using advanced econometric techniques and a substantial, diverse sample of banks in emerging economies across the Middle East and Africa.

Purpose: The purpose of this paper is to explore how ownership concentration affects cost of debt (CoD) in one of the most important emerging markets in the Middle East and North Africa, Morocco.Design/methodology/approach: The study employs panel data analysis using non-financial firms listed on Casablanca Stock Exchange (CSE) between 2004 and 2016. To unveil the hidden facets of the relationship between ownership concentration and CoD, and examine if this relationship changes with market conditions, we conduct a pre–post-crisis analysis.Findings: The results demonstrate that controlling shareholders promote decent governance as long as they are able to generate appropriate returns. However, this behavior seems to change during the post-crisis period. In their attempts to increase their returns adversely affected by the financial crisis, controlling shareholders switch from guardians of decent governance and firm’s resources to a menace to creditors’ interests.Practical implications: Our results expose the severity of agency problems in CSE. It is the duty of all market participants including regulators, board of directors, financial analysts, shareholders and creditors to scrutiny and reinforce governance mechanisms to alleviate expropriation by controlling shareholders. Improving country and firm-level governance mechanisms would enhance investors’ protection, attract international investors and boost the economic activity.Originality/value: Prior research is inconclusive about the impact of ownership concentration on CoD. Hence, it is worthwhile to seek new evidence in a new market on the nature of this relationship.