Heterogeneity of the MENA region's bank stock returns: Does country risk matter?

This study examined the impact of country-risk factors on bank stock returns in the Middle East and North Africa (MENA) region countries. It also investigated whether Islamic banks differed from conventional banks and whether oil rent significantly moderated the risk-returns nexus. Using data from 137 banks from 2011 to 2019 and the 2S-GMM method showed that returns reacted positively to low risk. Islamic banks scored higher returns than conventional banks except with financial risk and democratic accountability, and the risk-returns nexus depended on oil. The results suggested that MENA countries should further enhance political stability and economic resilience and upgrade socioeconomic conditions.