Table of Contents

Introduction. 3

Literature Review.. 4

Characteristics and intellectual Capital performance. 4

The Finindings. 5

Relationship between banking market competition and risk-taking. 6

Effects of competition on Bank performance. 9

Importance of capital requirements. 10

References. 12

Introduction of Gulf Cooperation Council (GCC)

            In the introduction, several research articles, as well as journals, are studied and mentioned in the literature review which provide the comprehensive information of the relationship between the efficiency, capital as well as the risk in the sector of GCC banking for the identification of efficiency of the banking sector as well as its effects on the risk and the capitalisation. The literature review study is providing the brief information on the capital performance as well as the characteristics, the relationship between the risk-taking as well as the competition of the banking market, the impact of this competition on the banks and performance on the banking sector in Gulf regions as well as the importance of the capital requirements discussed in the literature review.

Different kinds of research studies as well as multiple efforts of the researcher mentioned in this article which makes the literature review stronger. Furthermore, the report on the relationship between the efficiency, capital and risk are also telling that different researchers did perform different researches as well as the performed different methodologies which generated different results after processing.

The strategic ownership of the institutions domestically, family ownership, as well as the size of the board, have an important link with intellectual capital performance. By measuring operational and liquidity risks using the ratios of financial statements as well as measuring credits, the analysing risks were involved in the second stage. The results of the research indicate a similarity between the capital structure of the conventional banks in Gulf regions. Some things will go opposite in the case of bigger banks because they can get more advantages to forming this kind of competition.

The return of assets, as well as the return on equity, have been used as the measures of the performance. The relationship is identified the conventional banks. The practical outcomes suggest the characteristics of the specific bank which have very important in the specific bank capitalisation as well as the risk of credit. The industrial variables, as well as the regulatory variables, appear to affect the performance of the bank. The contract with the requirements of Basel capital increases the protection of the banks against the risk.

Literature Review of Gulf Cooperation Council (GCC)
Characteristics and intellectual Capital performance

Al-Musalli & Ismail (2012) states that the level of intellectual performance of the listed banks in GCC countries through the methodology of the value-added intellectual coefficient. It examines the effect of many corporate governance variables, the characteristics of the banking industry as well as the particular characteristics of the bank on the performance of an intellectual capital performance, are examined by the research study.

Through consideration of banking industry characteristics, foreign and domestic strategic ownership of the institutions, as well as the bank-specific characteristics, are extended by the research of this study. Furthermore, the findings of the research study represent that the strategic ownership of the institutions domestically, family ownership, as well as the size of the board, have an important link with intellectual capital performance.

The table given below is showing the descriptive statistics of the variables. The intellectual capital performance differs from the negative value of -4.28 to 12.10 with a mean of 4.20. Al-Musalli & Ismail (2012) report the mean score between the mentioned United Arab Emirates local banks consistently with the score of 4.4 for the similar period of 2008 to 2010 for the pooled data for ten years between 1996 to 2006.

The Findings of Gulf Cooperation Council (GCC)

The average intellectual performance of the mentioned banks of Gulf regions in the study which is lower than those for banks in different countries while the intellectual performance is greater than particularly related reports in the region of Australia with 3.80 score.

Table 1

 The regression analysis on such results of the basic model can be seen in the second column of the mentioned Table. The model of the regression is important with the P < 0.00 as well as F < 20.572 with the adjusted R square of 0.667.

Moreover, the study is also providing evidence except for bank-specific characteristics as well as for the internationality of the bank. On the other side, significant roles are played by the characteristics of the banking industry in recognition of intellectual capital performance amongst GCC banks (Al-Musalli & Ismail, 2012).

Relationship between banking market competition and risk-taking

As described by Tabak, Dimas, & Cajueiro (2012) that there are many effects of the competition of the banks on the risk-taking activities as well as behaviours in some Latin American countries between the years of 2003 and 2008. To examine the effects of the competition among the banks, the researchers conduct their empirical approaches in two different ways.

The first approach is the estimation of the Boone indicator that is the portion of the competition. The second empirical approach is to regress the measure of the competition as well as different explanatory variables on the inefficient stability of the banking derived immediately through estimating the stochastic frontier stability.

Furthermore, the findings of this study represent that the risk-taking behaviour is affected by such kind of competition in a nonlinear way as both competition levels (low and high) increase the financial stability of the company. But on the other side, the researchers found a completely differing impact on the average competition.

As stated by Tabak, Dimas & Cajueiro (2012), the essential factors for the elaboration of such kind of relationship are the size of the bank as well as capitalisation. On the other side, some things will go opposite in the case of bigger banks because they can get more advantages to form this kind of competition.

Furthermore, the big capital ratio is very beneficial for those banks which are operational in the rigid markets, but the capitalisation only enhances the stability of the big banks under the average as well as higher competition. In the global financial markets, the results of this study have the highest significance at the time of consideration of the regulation of the banks particularly in the sense of the latest disorder (Tabak, Dimas, & Cajueiro, 2012).

As Said (2013) described, the correlation between the efficiency as well as the risks are examined in the research. Three stages of analysis were used to recognise the risks and efficiency of banking in the Gulf regions. The first stage of the analysis contained the measurement of the efficiency of such bands through hiring engaging the approach of nonparametric and the data envelopment analysis. By measuring operational and liquidity risks using the ratios of financial statements as well as measuring credits, the analysing risks were involved in the second stage.

To examining the correlation amongst the liquidity of risks, credit and operational risks, the Pearson correlation coefficients are involved in the third stage to efficiency in the years of 2006 – 2009. The findings of the study exposed that the credit risk owns the negative relationship for efficiency but the operational risks have also recognised to become a negative correlation to efficiency as well.  In the Gulf region, the liquidity of risk represents an insignificant correlation to make its effectiveness in conventional banks (Said, 2013).

As described by Meero (2015) that there is a strong relationship among the performance in the banks of Gulf countries as well as the capital structure. The research study has two major goals. The first goal is to recognise the likeness and link of the capital structure among the conventional banks. While the second objective of this research to find out the connection among the variables of capital structure, conventional banks as well as the performance of the banks in Gulf countries.

The examination on the relationship between the performance of GCC banks as well as the capital structure has been conducted on the sample of 16 Gulf countries banks such as eight conventional banks for specific years of 2005 to 2014. The return of assets, as well as the return on equity, have been used as the measures of the performance. On the other side, as the measures of the capital structures, debt to equity ratios, resultant debt for the total assets as well as the equity to total assets have also been used.

Table 2

 As stated by Meero (2015), to recognise the relationship with the performance of the bank, the bank size was considered as the dependent variable. Furthermore, SPSS software was used to analyse the data which was collected for this purpose. The results of the research indicate a similarity between the capital structure of the conventional banks in Gulf regions. Furthermore, the positive relationship with the equity as well as the important negative relationship with the financial leverage is owned by the return on assets like the measurement of the performance to the ratio of assets.

So, the connection is recognised at all the banks used in the sample as well as the conventional banks. Furthermore, a positive relationship with the return of equity as well as the return on assets is owned and linked with the size of the bank as the measurement of the performance conducted in conventional in the Gulf Countries (Meero, 2015).

Effects of competition on Bank performance

            Naceur & Omran (2011) examined the impact of the concentration, development of the financial and institutions on the margins of the commercial banks as well as the profitability throughout a broad selection of the countries of North America and the Middle East, as well as the regulation of the banks are also examined.

In the specific bank capitalisation as well as the risk of credit, the practical outcomes suggest the characteristics of the specific bank which have very important as well as a positive effect on the profitability, net interest margin as well as cost-efficiency of the banks. Furthermore, Naceur & Omran (2011) also found that the development indicators of finance, as well as macroeconomy, have no notable effect on the profitability and net interest margins instead of inflation. Although, the industrial variables, as well as the regulatory variables, appear to affect the performance of the bank (Naceur & Omran, 2011).

The diagram mentioned below is showing the efficiency score of the banks in the GCC Banks between the years of 2007 to 2012.

Importance of capital requirements of Gulf Cooperation Council (GCC)

As stated by Bitar, Saad & Benlemlih (2016), the research study inspects and measures the effects on the performance and risk of the banks in both regions such as North Africa as well as the Middle East, as well as the research also provides advantages from numerous risk-based and no risky regulatory ratios of the capital. The findings of the researchers suggest that the agreement with the requirements of Basel capital increases the protection of the banks against the risk as well as it also brings improvement by making changes in the profitability and efficiency of the bank.

Furthermore, with having good governance in the mentioned regions, it pronounces more the effect of the requirements of the capitals on the performance of the banks for the too big to fail the banks, the banks in the countries as well as banks in the instability of finance. For the Arab Spring period of transition, the outcomes of the research are also strong at the time of control. In the last, the findings of the research study are confirmed by the compact analysis, alternative risk, endogeneity checks, the principle of the analysis of the component as well as some different kinds the techniques for estimation (Bitar, Saad, & Benlemlih, 2016).

            As Srairi (2010) stated, through the use of stochastic frontier approach, the study of this article examines the efficiency levels of profit as well as the cost of 71 commercial banks within GCC in years of 1999 – 2007. The research also conducts the comparative analysis of the efficiency throughout the countries in conventional banks. Furthermore, the researcher of this study examines the variables of bank-specific, which can describe the sources of incompetence. The experimental finding of the research that the banks in the region of Gulf are relatively more efficient at the generation of the profits rather than the costs of the controlling.

            Sairi (2012) further described that both terms the profit and the cost levels of efficiency, the average amount of the conventional banks are more efficient than Islamic banks in the Gulf regions. Although, the observations of this research also telling that the profit efficiency as well as the positive correlation of cost with the bank of profitability and capitalisation, as well as the negative one with operation cost. The profit efficiency of the banks is increased by the higher loan activity, while it has negative effects on the efficiency of cost (Srairi, 2010).

References of Gulf Cooperation Council (GCC)

Al-Musalli, M. A.-K., & Ismail, K. N. (2012). Corporate governance, bank-specific characteristics, banking industry characteristics, and intellectual capital (ic) performance of banks in the Arab gulf cooperation council (GCC) countries. Asian academy of management journal of accounting and finance, 8(1), 115-135.

Bitar, M., Saad, W., & Benlemlih, M. (2016, September). Bank risk and performance in the MENA region: The importance of capital requirements. Economic Systems, 40(3), 398-421.

Meero, A.-A. (2015). The Relationship between Capital Structure and Performance in Gulf Countries Banks: A Comparative Study between Islamic Banks and Conventional Banks. International Journal of Economics and Finance, 7(12), 1916-9728.

Naceur, S. B., & Omran, M. (2011, March). The effects of bank regulations, competition, and financial reforms on banks' performance. Emerging Markets Review, 12(1), 1-20.

Said, A. (2013). Risks and Efficiency in the Islamic Banking Systems: The Case of Selected Islamic Banks in the MENA Region. International Journal of Economics and Financial Issues, 1, 66 - 73.

Srairi, S. A. (2010). Cost and profit efficiency of conventional and Islamic banks in GCC countries. Journal of Productivity Analysis, 34(1), 45–62.

Tabak, B. M., Dimas, M. F., & Cajueiro, D. O. (2012, December). The relationship between banking market competition and risk-taking: Do size and capitalisation matter? Journal of Banking & Finance, 36(12), 3366-3381.