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Market Power and Credit Risk: An Empirical Analysis of GCC Banking

Abdullah Aldousari

Journal of Economic Integration2026https://doi.org/10.11130/jei.2025031article
AJG 1ABDC C
Weight
0.50

What the paper says

This study examines the relationship between competition and credit risk, with an emphasis on how the Covid-19 pandemic has affected banks.The analysis covers 44 commercial banks in the GCC banking sector for the period 2010-2022 using System GMM method and panel data fixed effects methods.The research reveals a non-linear relationship, in which both the fragility and stability hypotheses hold.During economic expansion, higher market power increases credit risk, reflecting reduced competitive pressure that enables riskier lending.Conversely, during the pandemic, banks with greater market power exhibited lower NPLs, and responded prudently by tightening credit standards and monitoring borrowers.This research highlights an important trade-off: while individual market power enhances bank-level stability during pandemic, overall market concentration (HHI) increases risk-taking -as external shocks amplify fragility in concentrated systems.Market power is a double-edged sword that promotes efficiency and diversification while simultaneously increasing reliance on capital.

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https://doi.org/https://doi.org/10.11130/jei.2025031

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@article{abdullah2026,
  title        = {{Market Power and Credit Risk: An Empirical Analysis of GCC Banking}},
  author       = {Abdullah Aldousari},
  journal      = {Journal of Economic Integration},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.11130/jei.2025031},
}

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Market Power and Credit Risk: An Empirical Analysis of GCC Banking

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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