The strength of the Lebanese banking system in the face of political instability. (c2008)

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dc.contributor.author Hobeika, Maya T.
dc.date.accessioned 2010-09-27T13:19:16Z
dc.date.available 2010-09-27T13:19:16Z
dc.date.copyright 2008 en_US
dc.date.issued 2010-09-27
dc.date.submitted 6/8/2008
dc.identifier.uri http://hdl.handle.net/10725/119
dc.description Includes bibliographical references (leaves 66-67). en_US
dc.description.abstract This thesis is a study of one of the leading sectors in the Lebanese economy, namely its banking sector. Actually it is an attempt to explain the strength of the Lebanese banking system in spite of the permanent political instability in general and after the Taif agreement in particular. It therefore analyzes the relationship between the Central Bank and the commercial banks, and the policies and laws that allow the banking sector to prosper and the state’s actions to protect the banking system. The liberal economic ideology prevalent in Lebanon is also central to the explanation. This paper analyzes how bank characteristics and the overall financial environment affect the performance of commercial banks and their relationship with the Lebanese Central Bank. Specifically, the purpose of the study is to give a closer look to the relationships between profitability and the banks’ characteristics, after controlling for economic and financial structural indicators under the conditions of the Lebanese Central Bank. A variety of Lebanese banks were chosen, concentrating on the most profitable and the most effective banks in Lebanon. The intention is actually to make the decision about the important determinants of performance. In this way, the paper extends the literature in several ways (Abelson, 1983). Politics in Lebanon has a major impact on the performance of the financial system. However, despite this impact, the banking system in Lebanon remains active and effective. Thus, despite the fact that the banking system in Lebanon is highly affected by politics, it remains to maintain solidarity and effectiveness. For this purpose, an entire set of internal characteristics is examined as determinants of banks’ net non-interest margin and productivity. These include bank size, liquidity, loans, deposits and some others. Also, while studying the relationship between banks’ internal characteristics and activity, I was able to detect the direct impact of external factors, such as macroeconomic inflation and exchange rates. It was apparent from the results and the regression and correlation analysis that the ‘Return on Equity’ (ROE) of commercial banks is highly influenced by the independent banking variables determined. The existing relationship is both negative and positive. While some variables affect the profitability negatively, other variables affect it positively (Abelson, 1983). The following empirical analysis allows me to highlight the relationship between banking characteristics and performance measures in commercial Lebanese banks. As a start, the Lebanese commercial banks profitability measures react positively to the increases in capital and loan ratios. This result is in harmony with previous studies. In addition, it shows that optimal capital ratios and loan portfolios are essential factors for determining the performance of Lebanese commercial banks, in addition to other factors such as customers’ deposits, non-interest earning assets and banks’ profits. Moreover, I noted that liquidity factors are even more vital for the determination of bank performance (Abelson, 1983, p. 15). The 1975-1990 war destroyed most of the country’s economy. However, major economic changes accompanied the demographic changes in Lebanon and, despite this war the banking system remained powerful in Lebanon. Finally, it should be recognized that the range of this paper is limited as several Lebanese commercial banks are not included and several interesting questions were left unanswered. These questions analyze more fully the interaction between the political and the banking system in Lebanon and show how banking stability could be influenced by the political stability of Lebanon. Also, because of the size of the sample and many missing observations, the results should be explained carefully. As has been the case of many recent studies, the results are not very robust and may be responsive to the type of measure of performance used. 1 Thus, in general, the profitability determinants of Lebanese commercial banks are various and numerous in nature. The loans, size, growth, exchange rates, inflation, deposits, liquidity can have a direct impact on the profitability level. However, the ROE level is not limited to those variables. Other variables do have a direct impact on the profitability as well. As already noted, such variables seem to be Lebanese politics and state policies as well as other new economic and competitive regulations. en_US
dc.language.iso en en_US
dc.subject Banks and banking -- Lebanon en_US
dc.subject Political stability -- Economic aspects -- Lebanon en_US
dc.title The strength of the Lebanese banking system in the face of political instability. (c2008) en_US
dc.type Thesis en_US
dc.term.submitted Spring en_US
dc.author.degree MA in International Affairs en_US
dc.author.school Arts and Sciences en_US
dc.author.idnumber 200500122 en_US
dc.author.commembers Bassel Salloukh
dc.author.commembers Sami Baroudi
dc.author.woa OA en_US
dc.description.physdesc 1 CD-ROM + 1 bound copy: 67 leaves; 31 cm. available at RNL. en_US
dc.author.division International Affairs en_US
dc.author.advisor Jennifer Skulte-Ouaiss
dc.identifier.doi https://doi.org/10.26756/th.2008.1 en_US
dc.publisher.institution Lebanese American University en_US
dc.author.affiliation Lebanese American University en_US

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