The impact of political risk on banks’ profitability in unstable environments: Evidence from FCC countries
This paper examines the impact of the political risk on the banking sector in the FCC region.
The financial institutions in the FCC region were faced with political risk and economic uncertainty (Peters, Raad, & Sinkey, 2004; Valensisi, & Missaglia, 2010). The uncertainty in the political environment in the FCC region has made it difficult for the banking institutions to manage risks, as these risks adversely affect the banks’ profitability (Abdelkarim, 2007). The Fertile Crescent Countries (FCC) are located in the heart of the Middle East. They involve Lebanon, Syria, Iraq, Palestine, and Jordan (Qtaishat, 2013). It has been observed that the banks’ profitability in this area has been on a declining trend since the global financial crisis 2008/2009 (BankScope). The volatility and decline in banks’ profitability are important issues that need more concentration and investigations due to the profitability shocks (Bongini, P., Cucinelli, D., Di Battista, M. L., & Nieri, L. 2018).