A Fixed-Effects Analysis of Saudi Bank Capital Adequacy: Examining Pandemic Shocks, Capital Structure, and Macroeconomic Drivers

Abstract

This study analyzes data from ten major banks that form the backbone of the kingdom's financial system in order to investigate the macroeconomic and bank-level variables that influence banking performance in Saudi Arabia during the revolutionary years of 2015–2024 using a fixed-effects panel regression model with cluster-robust standard errors. The results show that while higher leverage had a negative effect on performance, COVID-19 had a significant positive impact on bank returns, indicating effective regulatory interventions. While bank size and profitability metrics were negligible, GDP growth had marginally positive effects. By showing how regulated banking systems with concentrated market structures react to external shocks and structural changes, the study adds to the body of knowledge on emerging market banking. The findings provide crucial information for investors, bank managers, and regulators navigating Saudi Arabia's changing financial environment.