Saudi Banks Research Articles

Requirements of Management Information Systems in Enhancing the Dimensions of Organizational Culture for Employees in the Saudi Banking Sector: Case Study on Al-Rajhi Bank in Asir, Kingdom of Saudi Arabia

Requirements of Management Information Systems in Enhancing the Dimensions of Organizational Culture for Employees in the Saudi Banking Sector: Case Study on Al-Rajhi Bank in Asir, Kingdom of Saudi Arabia

Impact of Oil Price Shocks on Islamic and Conventional Bank Performance: Empirical Evidence from Saudi Arabia

This paper aims to investigate and compare the effect of oil price shocks on the bank performance at the aggregate level as well as the level of conventional and Islamic banks. The Autoregressive Distributed Lag (ARDL) methodology was adopted to analyze a panel of 10 Saudi banks, including 6 conventional and 4 Islamic banks, between 2006 Q1 and 2022 Q4. The results revealed that oil price shocks have a direct impact on banking performance. A rise (fall) in oil prices led to an increase (decrease) in bank performance through the channel of price-induced bank deposits. Additionally, oil price shocks have asymmetric effects, with positive oil shocks having a greater impact on bank performance than negative shocks. The findings highlighted that conventional banks tend to benefit more from oil price shocks, especially during oil price booms, as they experience higher positive impacts. However, during oil price busts, Islamic banks were more adversely impacted by oil shocks.

Cross-Cultural Career Paths: Analyzing Traditional and Boundaryless Orientations Among Expatriates in Saudi Arabia's Banking Sector

This study aimed to investigate differences in dominant career orientations between self-initiated expatriates (SIEs) and company-assigned expatriates (AEs). Schein’s career model provides a theoretical framework to investigate differences in career preferences and orientations between SIEs and AEs. This paper builds career constructs by dividing the eight career anchors into two groups (boundaryless and traditional-oriented anchors). The career anchor model is used to investigate if a comparable sample of SIEs and AEs drawn from the banking sector in Saudi Arabia exhibits traditional and/or boundaryless career orientations. A between-subjects design was used, and MANOVA was used to analyze data from 418 expatriates working within the Saudi banking sector to understand how the career orientations of SIEs and AEs differ. Compared to AEs, SIEs were found to be more oriented to traditional career anchors characterized by technical/functional competence and security/stability. This study makes an important contribution to existing knowledge on SIE orientations by identifying differences that exist between traditional and boundaryless careers. The findings reveal differences between SIEs and AEs regarding their technical/functional competence, security/stability, lifestyle, and pure challenge career anchors. Managers need to use bespoke HRM policies and procedures to cater to the career orientation of each expatriate cohort accordingly. This quantitative study reveals factors that impact organizationally and individually managed careers in different directions. Therefore, this study presents a clear distinction between the two career orientations and argues that they can be viewed through the lenses of boundaryless and/or traditional career perspectives.

Enhancing Internal Factors Unlocks Profit in Saudi Banks

General Background: Banks' profitability is crucial for financial stability and economic growth. Specific Background: Internal factors such as capital adequacy, asset quality, and management effectiveness play a significant role in determining profitability. However, the impact of these variables on Saudi banks needs further exploration. Knowledge Gap: Existing research lacks a comprehensive analysis of how these internal variables affect the profitability of Saudi banks over a long period. Aims: This study examines the effect of changes in capital adequacy, asset quality, management effectiveness, and liquidity on the bank profit index, measured by the return on assets (ROA) at Saudi Fransi Bank from 2000 to 2022. Results: Quantitative analysis reveals that capital adequacy and asset quality have a significant positive impact on ROA, with 1% increases in each leading to 20% and 76% increases in ROA, respectively. In contrast, increased liquidity and management inefficiency negatively affect ROA, decreasing it by 33% and a significant margin, respectively. The internal variables account for about 96.4% of the variation in profitability. Novelty: This study offers a detailed long-term analysis of internal factors affecting bank profitability in Saudi Arabia. Implications: Enhancing asset quality and management effectiveness is crucial for improving profitability and reducing costs, benefiting both Banque Saudi Fransi and the broader banking sector. Highlights: Positive Impact: Capital adequacy and asset quality enhance bank profitability. Negative Impact: Higher liquidity and management inefficiency reduce profitability. High Explanatory Power: Internal variables explain 96.4% of profitability variation. Keywords: Bank Profitability, Return on Assets, Capital Adequacy, Asset Quality, Management Effectiveness

Financial Analysis of Saudi Banks: Economic Perspective of NCB and BSF Analysis

Financial Analysis of Saudi Banks: Economic Perspective of NCB and BSF Analysis

Assessing The Role of Executive Procedures in Shaping Sharī’ah Governance Commitments in Saudi Banks

This paper investigates the relationship between governance dimensions and the level of commitments to Sharī’ah (Islamic law) governance framework within Saudi banks. To understand the intricacies of governance dimensions in shaping Sharī’ah governance practices in depth, this paper also examines the mediating role of executive procedures. Structural equation modeling is used to test the hypotheses regarding the relationship between studied variables. The findings underscore the role of executive procedures, disclosure and transparency in fostering commitments to Sharī’ah governance framework, with both constructs exhibiting substantial direct effects on Sharī’ah governance commitment level. Additionally, the study underscores the importance of monitoring, auditing, and accountability as crucial determinants of governance in banks, highlighting the importance of robust oversight mechanisms in ensuring adherence to Sharī’ah principles. Meanwhile, organisational structure exhibited a minor decrease in its direct effect on commitment to Sharī’ah governance. The findings of this paper can guide the strategic decision-making process for promoting ethical and sustainable Sharī’ah governance practices in Saudi banks. It also fills the existing gap in literature regarding the relationship between the dimensions of governance and the obligations of Sharī’ah governance framework in Saudi banks.

A Proposed Model for Organizing The Regulation and Supervision of The Saudi Central Bank on Islamic Banks

The study aimed to design a proposed model for a system of regulation and supervision of Islamic banks that is consistent with the characteristics and nature of its work, by answering the main question: What is the proposed vision for the Saudi Central Bank to create an appropriate regulatory and supervisory regime for Islamic banks? To accomplish its main goal represented in establishing a proposed model for designing a supervision and regulation system for Islamic banks operating in the Saudi banking sector. The study used the deductive and inductive approaches to achieve its main goal. The study considers its construction of a proposed model that enables the Central Bank of Saudi Arabia to reach the formulation of a system of supervision and control of Islamic banks, the most important result that has been reached.

Intellectual Capital and Bank Stability in Saudi Arabia: Navigating the Dynamics in a Transforming Economy

This research investigates the influence of intellectual capital on the stability of banks in the evolving context of Saudi Arabia’s banking sector. Against the backdrop of rapid economic reforms under Vision 2030 and the challenges imposed by the COVID-19 pandemic, this research incorporates specific metrics related to these contexts and provides a nuanced analysis of how intellectual capital and its components (human capital efficiency (HCE), structural capital efficiency (SCE), and capital employed efficiency (CEE)) affect the financial stability of Saudi banks. This research analyzes a decade-long panel dataset for ten major Saudi banks from 2012 to 2022, utilizing both fixed-effects and cross-section random-effects models to discern the impact of intellectual capital on bank stability. The findings reveal a positive overall influence of intellectual capital on bank stability; however, individual components present a complex relationship, with CEE showing a positive association and HCE and SCE demonstrating unexpected negative correlations with bank stability. The research identifies leverage (LEV) as a significant factor negatively impacting stability. Operational efficiency (OPEF) and size (SIZE) also negatively affect stability. Surprisingly, macroeconomic indicators and bank size exhibit non-significant effects on bank stability. Similarly, the direct impact of the COVID-19 pandemic was found to be non-significant, suggesting a resilient banking environment or the presence of effective mitigating strategies. As Saudi Arabia continues its ambitious economic transformation, this research underscores the critical role of effectively managed intellectual capital in ensuring the banking sector’s stability. It provides a foundation for ongoing research in this vital area.

The Impact of RegTech on Compliance Costs and Risk Management from the Perspective of Saudi Banks’ Employees

Through this research, we will be analyzing the Effect of RegTech on Compliance Costs and Risk Management in the Banking Sector, mainly with the eye of people in administrative roles in Saudi Banks, a total of 232. A new technological trend is reshaping the financial industry, RegTech, marked by various advanced technological processes and automation. The main findings show that RegTech significantly reduces compliance costs, confirming its cost-saving potential. Therefore, Employee perceptions are critical to integrating and adopting RegTech within business operations. In addition, RegTech improves risk management systems with more accessible procedures and better internal controls. This proves RegTech’s ability to improve the banking processes and strengthen the risk management system. Proportional to the organizational support, tool investments, and tool diversity interactions are moderated, and operational efficiency is enhanced. This research contributes significantly to the more profound knowledge of the implication of RegTech in the Saudi banking sector, which facilitates transformation through renewed practices in the industry alongside its efficiency.

On the Determinants of Loan Default in the Saudi Banking System

The main purpose of this paper is to examine the key determinants influencing the non-performing loans (NPLs) in the Saudi banking system. To do so, we consider a set of macroeconomic, banking, and external factors over the period 2010Q1-2023Q3. The contribution of this work to the literature includes providing fresh evidence following the COVID-19 pandemic, utilizing quarterly observations unlike preceding literature, and adopting time series econometric techniques to identify key elements influencing NPLs. A vector error correction model (VECM) is estimated to capture NPL dynamics over both the long-run and short-run. The empirical evidence reveals that NPLs are determined by a combination of macro, banking, and external factors. Specifically, macroeconomic and external variables appear to have a significant impact on NPLs, and their effects are in parallel with theoretical expectations. Likewise, the impact of return on equity on NPLs is significant as expected by theory; however, the impact of other banking factors is against expectations.

Macroeconomic Factors and the Performance of the Saudi Banking Sector: Does Oil Price Matter?

Macroeconomic Factors and the Performance of the Saudi Banking Sector: Does Oil Price Matter?

Fintech Service Quality of Saudi Banks: Digital Transformation and Awareness in Satisfaction, Re-Use Intentions, and the Sustainable Performance of Firms

The present study examined the effects of the service quality regarding fintech and customer satisfaction on the sustainable bank performance, with digital transformation and digital awareness as the mediator and moderator in the Saudi Arabian banks. Using an online survey questionnaire, data were collected from 306 customers and an equal number of customer care officers, resulting in a 62.58% response rate. The findings revealed that the tangibles, reliability, and empathy about the fintech services significantly influence customer satisfaction. However, assurance and responsiveness did not significantly influence customer satisfaction. The results also showed that customer satisfaction regarding fintech services significantly and positively influences the intention to re-use fintech services, indicating the centrality of maintaining a high customer satisfaction for retention. Interestingly, while the intention to re-use fintech was directly linked to the sustainable performance of banks, the direct impact of digital transformation on the performance was not significant. Additionally, digital awareness about using fintech services significantly and positively influences the sustainable bank performance. The study also tested the moderating effect of digital awareness between customer satisfaction and sustainable performance, but the relationship was not significant. By offering the study’s novel findings, this research underscores the implications of fintech adoption and its quality dimensions on bank performances in the Saudi context.

Assessing the Impact of COVID-19 on the Saudi Bank’s Performance: A Panel Analysis

The primary objective of this study is to assess the performance of Saudi banks over a specified period, which is from 2015 to 2021. The chosen methodology for this analysis is panel data regression. Panel data combines cross-sectional and time-series data, making it suitable for examining trends and relationships over time among different entities (in this case, banks). The study uses annual financial data for the 10 selected banks over the seven-year period, from 2015 to 2021. The study finds a marginally negative association between COVID-19 and the performance indicators ROA and ROE. This suggests that the COVID-19 pandemic had a slightly adverse impact on the profitability and equity returns of the Saudi banks included in the analysis. The study employs a dummy variable, likely called "COVID," to account for the impact of the COVID-19 pandemic. The results indicate that there is a statistically significant but weakly negative association between return on equity (ROE) and credit risk (CR). The study finds that credit risk and liquidity risk are both insignificant when analyzing return on assets (ROA). These findings provide valuable insights into how external factors like a pandemic and internal factors like credit risk can affect the financial performance of banks. The study's results offer regulatory authorities in Saudi Arabia a valuable resource for making informed decisions regarding the financial performance and stability of the banking sector during a crisis. By incorporating these findings into their policies and oversight activities, regulatory bodies can contribute to a healthier and more robust banking system that benefits both the financial institutions and the broader economy.

Evaluating the impact of COVID-19 on the profitability metrics of Saudi Arabian banks: A panel data analysis

This study aims to evaluate the impact of the COVID-19 pandemic on the profitability of Saudi Arabian banks from Q1 2015 to Q2 2023. Using quantitative analysis of panel data from ten banks, the study assesses profitability through Return on Assets (ROA) and Return on Equity (ROE). Independent variables include bank-specific factors (Capital Ratios (CPTL), Operational Efficiency (OPEF), Deposits (DEP), Bank Size (SIZE)) and country-specific factors (Inflation (INF), Gross Domestic Product (GDP)), with the pandemic as a moderating factor. The findings reveal varied relationships between these variables and bank profitability. A significant negative relationship is observed between CPTL and ROE, suggesting that higher capital ratios may decrease profitability. OPEF and SIZE also show significantly negative relationships with both ROA and ROE, indicating that increased operational efficiency and bank size could lead to lower profitability. Conversely, DEP positively correlates with ROE, implying that banks with higher deposits achieve better equity returns. Interestingly, GDP and INF do not significantly affect bank profitability. These insights highlight the resilience and operational dynamics of the Saudi banking sector during COVID-19, emphasizing its robustness. The findings offer practical implications for policymakers, regulators, and banks in preparing for future systemic shocks and ensuring the sector's sustainability and stability.

Corporate Governance and FinTech Innovation: Evidence from Saudi Banks

The rising adoption of FinTech is changing the financial sector. However, the determinants of FinTech have not been examined thoroughly. The purpose of this paper is to examine whether corporate governance is related to FinTech products in the banking sector, given that governance may influence the quantity and quality of innovation. Specifically, we investigate the association between the size of the board of directors, the percentage of independent directors on the board and FinTech services. Furthermore, we show how the composition of the board can influence the association between FinTech services and a bank’s performance. Using a sample of 12 Saudi banks for the period 2014–2019, we find that board size is significantly and negatively associated with a bank’s FinTech score. We further show that independent members on the board contribute to performance by bringing more FinTech services (innovation development) to the banks. As the first study examining the determinants of FinTech in the Saudi banking sector, this paper may help regulators to better understand the drivers of FinTech and its quality in the banking sector.

Cost Malmquist productivity analysis during the COVID-19 outbreak: evidence from the largest dual banking industry

PurposeThis study attempts to comprehensively analyze the cost Malmquist productivity index of conventional and Islamic banks in Saudi Arabia, the largest dual banking sector in the world, during the COVID-19 pandemic.Design/methodology/approachThis study employs the novel approach of cost Malmquist productivity index, which focuses on production costs, to measure the change in cost productivity so that the actual impact of the COVID-19 pandemic could be captured.FindingsThe Saudi Central Bank has successfully mitigated the impact of the COVID-19 epidemic on the Saudi banking sector by implementing several policies and services. This success is reflected in the large positive shift in the production frontier of Saudi banks. Moreover, it was found that Islamic Saudi banks were by far more productive than conventional Saudi banks during the COVID-19 pandemic. However, the total cost productivity index (CMPCH) of Islamic Saudi banks starts to decline sharply in the last quarter of 2022 compared to conventional Saudi banks, indicating that Islamic banks in Saudi Arabia are suffering the most from the tighter monetary policy recently implemented by the Saudi Central Bank.Practical implicationsThe results provide insights for policymakers and investors on how different types of banks respond differently to economic crises and monetary policy changes. Targeted support measures may be needed to ensure all banks remain productive and efficient.Originality/valueTo the author’s knowledge, this is the first study to use this innovative methodology to assess the impact of COVID-19 on bank performance in a dual banking sector.

The Impact of IFRS Mandatory Adoption on the Performance of Saudi Banks

The study aims to determine the impact of IFRS mandatory application on financial and market performance, in the Saudi Arabian banking sector for the period from 2012 to 2021. The results of this study show that there is no relationship between the IFRS mandatory application and each of the rates, return on equity, and return on assets, while there is an inverse relationship with earnings per share. In terms of the effect on the market performance, the study concluded that there is no relationship between the IFRS mandatory application and each of the volume and value of trading, and there is a positive relationship on the growth rate. The study attributed these results to several reasons, the most important of which is the gradual application of the IFRS, which was followed by Saudi Arabia, in accordance with strict executive procedures from the Saudi Arabian Monetary Authority (SAMA).

The Impact of Implementing Value Added Tax on the Prices of Banking Services in Saudi Banks "An Analytical and Applied Study”

The Impact of Implementing Value Added Tax on the Prices of Banking Services in Saudi Banks "An Analytical and Applied Study”

The effect of financial technology on the financial performance of national Saudi banks

The effect of financial technology on the financial performance of national Saudi banks

A Study of Influencing Leadership Styles on Financial Performance in Saudi Arabian Commercial Banks

This study examined the relationships between different leadership styles and bank performance in Saudi Arabia. The partial least squared was conducted to assess the impacts of autocratic, democratic, laissez-faire, and transformational leaderships on financial performance of banks using data from 199 responses collected from 7 Saudi banks. The findings revealed that autocratic leadership had a significant positive effect on performance, while democratic leadership's influence was insignificant. Transformational leadership did not significantly impact outcomes despite correlating strongly with democratic leadership. Laissez-faire leadership was found to negatively influence transformational leadership. These findings provide useful insights yet also merit deeper examination of moderating factors. Autocratic leadership appears suitable given local preferences for hierarchy, but risks stifling creativity long-term. Democratic leadership fosters innovation but still be unable to affect positively the decision-making efficiency. Transformational leadership unexpectedly doesn’t positively affect the financial performance of banks in Saudi Arabia.