The Impact of Oil Revenues on banks’ Performance and Loan Quality: The Case of Saudi Banks.

Abstract

The study aimed to analyse the impact of oil revenues on the performance and the quality of the loan portfolio of banks registered on the Saudi capital market (TASI) for the period 2013-2022. The study used the panel data approach with the least squared regression models and fixed-effect regression models to analyse the data and test the study’s hypotheses. The results indicated that oil revenues had no direct impacts on the accounting -based indicators. However, oil revenues had positive impacts on market -based indicator. In addition, oil revenues had no direct impacts, on average, on the quality of loans. However, negative oil prices had direct impacts on the deterioration of the loan quality. Moreover, oil revenues had direct and positive impacts on the gross domestic production, which channelled the impacts of oil revenues to accounting-based performance indicators. The results of the study added incremental contributions to the current literature as it investigated the impacts of oil prices from different perspectives and explained the way oil revenues have affected the performance of banks. Therefore, the results of the study will be beneficial to several stakeholders including not limited to bank management and policy makers as it helps them understand the way oil revenues affected banks’ performance.