Corporate governance, concentration, and economic growth in the GCC banking sector

The aim of this paper is to study the growth and corporate governance implications of market concentration in the GCC banking sector. It will begin by defining corporate governance, its significance in the context of banks, and how it can be improved by more competition or less concentration in the banking market. It will then discuss the importance of corporate governance to “better functioning and well-behaved” financial systems, and how both can favorably affect growth. A discussion of the GCC economies and banking system will follow, with an emphasis on market concentration in the banking system. To document empirically the effect of banking market concentration on growth, we estimate a growth model to capture this effect, and find that the effect is positive but conditioned by the level of financial development.The paper conclude by stating that policies aimed at opening the GCC banking market, and creating less concentration in the process, will have a positive effect on growth when the financial system is relatively more developed.