Purpose The purpose of this paper is to investigate the effect of revenue diversification, non-interest income and asset diversification on the performance and stability of the Gulf Cooperation Council (GCC) conventional and Islamic banking systems. Design/methodology/approach The authors implement a panel of 69 conventional and Islamic banks listed in six GCC markets over the period of 2003–2015, using the System Generalized Method of Moments methodology. Findings Non-interest income diversification has a negative impact on GCC banks’ performance, while asset-based diversification affects banks performance positively. However, Investors tend to penalize the value of the banks’ assets, which are highly diversified. Government intervention, lack of competition, legal protection and high control of Central banks on GCC banks’ have positive impact on performance. Contrary to the results on conventional banks, asset diversification adds value to Islamic banks. Overall, both banks’ revenue and non-interest diversification have negative impact on GCC banks’ stability, while asset diversification improves Islamic banks’ stability. Research limitations/implications The analysis is limited to a sample of banks, which are listed in the GCC stock exchanges. The lack of data on private and foreign banks operating in the region made the analysis and, consequently, the results specific to shareholding companies. Also, the authors’ measures of bank stability might not be appropriate to use for Islamic banks, given their banking models implemented. Practical implications Research results provide important implications for regulators, bank managers and policy makers, as to the expected ways to support economic diversification through bank diversification strategies. Originality/value Unlike related studies, the authors’ sample of homogeneous banks has a market structure that is different from the samples in the literature covering either developed countries or heterogeneous samples from both developed and developing countries. Furthermore, using an efficient econometric methodology, the authors deal with two types of banks: conventional banks and Islamic banks. The research determines which type of bank is more able to benefit from different types of diversification. Unlike previous research, this research explores the sensitivity of the results both to the regulatory environment of the GCC market and to general market conditions.

Purpose -This study aims to examine the factors affecting the foreign direct investment (FDI) and foreign portfolio investment (FPI) flows among the 16 economies comprising the Middle East and North African (MENA) region. Design/methodology/approach -Panel data for the period 1984-2012 are used, and the generalized method of moment (GMM) technique is implemented. Findings -The results support the agglomeration effect, which indicates that countries which have already had FDI attract more FDI in the future. Economic risk affects FDI significantly and negatively, whereas trade openness has a significant and positive impact on FDI. Of the political risk factors considered, three of them, namely, law and order, ethnic tension and internal conflict, significantly affect FDI. The results on FPI show that the lag in FPI and the degree of openness play a significant role in attracting FPI into the MENA region. In addition, stock market capitalization, as well as the return on investment affects the FPI flow positively. The study also reveals a negative government structure impact on FPI, whereas, surprisingly, religious tension in the MENA region affects FPI positively. Originality/value -This research examines, simultaneously, the factors that determine not only FDI but also FPI flow. It uses a powerful econometric technique which avoids common estimation problems such as endogeneity, heteroskedasticity and autocorrelation. Policymakers in the MENA region recognized the need for outside capital as a major catalyst of development, economic growth and modernization. Therefore, it is essential to know the factors that would lead to a surge in capital flow to these countries.

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This paper uses a simple measure of liquidity creation to examines empirically the effect of bank capital and other micro and macro-characteristics on liquidity creation. We apply the analysis to data from a sample of 43 banks operating in 6 of the countries comprising the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) market over the period [1998][1999][2000][2001][2002][2003][2004][2005][2006][2007][2008]. Large banks with high capital seem to produce most of the liquidity by the banking sector in the GCC market. However, the negative relationship between profitability and liquidity created by banks indicate either high loan losses or high cost of intermediation.

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