The Impact of Financial Reforms Under Vision 2030 on the Profitability of Saudi Banks

Abstract

This research inspects the effect of the Vision 2030 financial reforms (Basel III implementation and IFRS 9 adoption) on Saudi commercial banks from 2010 to 2024. Profitability was measured using ROA, ROE and NIM. The importance of this research lies in its provision of a deeper understanding of the extent to which financial reforms can enhance the performance of Saudi banks in an environment characterized by a rapid pace of economic transformation, thus contributing to bridging an important knowledge gap related to measuring the actual effects of these changes, secondary data was collected from the audited statements of the banks, SAMA publications and international databases. The sample was drawn from eleven Saudi banks and analyzed by using descriptive statistics, correlation tests, fixed-effects and random-effects panel regression, structural break tests, and diagnostics using Stata v17. After the reform in the year 2017, there was a drop in profits showing short run adjustment costs. After the reforms, efficiency had a weak relationship with profitability. However, the capital and quality of the assets remained important drivers of profitability. There was no effect of liquidity, and the macroeconomic variables showed small positive effects from GDP growth, and negative effect for inflation consistently. The structural break test shows that reform caused profitability behaviour to change – but modestly. Panel econometric techniques were justified on the grounds of the non-stationarity of profitability measures