Determinants of Financial Banking Stability: An Empirical Study of Commercial Banks Listed in Muscat Security Market
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Date
2016
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Université de M'sila
Abstract
This study aims to explain the factors that affect on financial banking stability as determinants of banking sector
in Sultanate of Oman. This study used four independent factors consists of bank specific factor measured by
income diversity and size of bank , banking sector measured by concentration in market and P/E ratio,
macroeconomics factor measured by inflation and gross demotic product growth and external governance
measured by size of government and regulation. The dependent variable is financial banking stability measured
by Z- score. The population consists of six commercial banks listed in Muscat Security Market (MSM) over the
period 2008- 2014. This study used OLS regression analysis and the results shows there is a significant impact
of income diversity variable from specific bank factor and P/E ratio from banking sector at 1%, and 5%
significant level respectively, but macroeconomic and external governance factors are insignificant in all
variables. Multiple regression used and the results shows only specific bank and banking sector factors are
significant at 1% and 10% significant level. Finally, the regression runs for all independent factors and the result
shows there is a statistical impact of all factors on financial banking stability at 10% significant level. Pearson
correlations matrix used and found there is a significant relationship between most of factors at 1%, 5% and
10% significant level. The researcher recommends the need to adopt a system for the detection of risks in the
banking and financial system to maintain financial banking stability and mitigate the power crises.
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Keywords
Financial Banking Stability, Commercial Banks, Sultanate of Oman