Fluctuations in Global Oil Prices and Their Impact on The Financial Performance of the Banking Sector in Oil-Exporting Countries: Evidence from the Kingdom of Saudi Arabia
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Abstract
The research aims to provide a clear comprehensive picture of the mechanisms and channels through which global oil price fluctuations contribute to influencing the financial performance of the banking sector, while anticipating a quantitative model capable of estimating, testing and explaining the nature and direction of the impact of global oil price fluctuations on the banking sector profitability index and its value in the Kingdom of Saudi Arabia for the period 2014-2023 and for quarterly data, by adopting the Autoregressive Distributed Lag (ARDL) methodology presented by Pesaran et al. (2011). The estimation results revealed the existence of a statistically significant direct effect of global oil price fluctuations on the profitability of the banking sector, expressed by the return on assets index in the Kingdom of Saudi Arabia in the long term, while there was no agreement on the nature of this effect in the short term. The results also reflected the need to adjust the imbalances that occurred in the short term and return to the long-term equilibrium state, which requires a period of (3.414) chapter. Keywords: Oil prices, financial performance, banking sector, banking sector profitability. Return on assets.
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