The impact of financial development on the financial performance of commercial banks: empirical evidence from the Gulf Cooperation Council (GCC) countries

Abstract

The objective of this study is to investigate empirically the impact financial development on the financial performance of commercial banks operating in Gulf Cooperation Council (GCC) countries. The empirical part of this study is based on balanced panel data obtained from 61 commercial banks listed in the stock markets in the region under study during the period (2011-2020), by considering multiple regression analysis technique of panel data and by applying the panel-corrected standard error (PCSE) estimator. In light of the empirical results, the study concluded that there is a significant positive impact of the level of financial intermediation (FI), bank size (SIZE), and economic growth (GDP) on the financial performance of commercial banks operating in the Gulf Cooperation Council countries. While the study concluded that there is a significant negative impact of the monetary policy coefficient (MP) on the financial performance of commercial banks operating in the Gulf Cooperation Council countries, Based on the empirical analysis, of this study, the study recommends that banks to pay more attention to diversifying income from transactions, services and other alternative investment areas ( such as participation and speculation) instead of investing in the field of loans, and expanding its business lines towards financial advisory and commercial services and increasing non-interest income, and to counter the negative impact resulting from the development in the financial markets And that they take into account the subtle variables affecting their financial performance to make the right decision about their investments.