Negative effects of corruption on development

Debates about the risks of banking are increasingly open as financial crises keep striking.  A parallel session at the ERF 18th Annual Conference helped to shed some light on these issues. Two papers were presented in the session.

The first paper, Prevention du Risque de Defaillance Des Banques de la region MENA: Analyse par equations Simultanees en Donnees de Panel by Sanae Solhi and Abdelhaq Mehdi, looked for ways of preventing the risk of bank defaults on the basis of signaling indicators like z-score, using ratios of capital and prudential regulation in order to identify the determinants of the solvency/insolvency of banks.

The second paper, Stock Market Assessment of Bank Risk: Evidence from the Maghreb Region by Lassaad Mbarek and Dorra Mezzez Hmaied, examined the ability of stock market investors to monitor bank risk for a sample of listed banks in Tunisia and Morocco over the period 2003-2009. The paper constructed numerous market-based risk measures: market beta, idiosyncratic risk component and total volatility of bank stock returns derived from the market model of credit risk.

Professor Wafik Grais chaired the meeting. After the session, we recorded a short video interview with him capturing his impressions on the paper presented and the issue of corruption in the Arab region.

According to Prof. Grais, it is important to look ahead and not continuously “beat ourselves down.” He adds that the topic of the 18th ERF Conference has been a very good choice because corruption negatively affects development in the region. He adds that the papers discussed at his parallel session provided excellent contribution to the debate but more can and should be done  in this area.

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