Determinants of financial banking stability : an empirical study of commercial banks listed in Muscat security market

Abstract EN

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.