The Influential Relationship Between Interest Rate Swaps and Earnings: An Analytical Study of Sample Data from Banks in Several Gulf Cooperation Council Countries for the Period 2013-2023
Abstract
This research aims to examine the influence of interest rate swaps on banks' earnings within the context of modern capital markets, characterized by dynamism and continuous development, and to explore the role of derivative financial instruments in risk management and earnings generation. The research problem is to determine the extent of the impact of interest rate swaps, as an independent variable, on banking earnings, as a dependent variable. Given the notable variation in the levels of these swaps and asset management strategies between banks, the research population comprises 40 banks listed on the stock exchanges of Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates (Dubai Emirate). A sample of 12 banks, representing 30% of the population, was selected for the period from 2013 to 2023. The research concluded with a fundamental finding that the strong positive relationship and direct significant impact of interest rate swaps on return on assets indicate that these instruments are not merely a means of hedging risks but are effective factors that directly contribute to improving banks' financial performance and increasing their ability to generate earnings from their assets. Based on this, it is proposed that banks that have not sufficiently exploited interest rate swaps should reassess their current strategies and explore how to integrate these instruments more effectively into the asset and liability management framework to improve earnings and reduce interest rate risks.
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This work is licensed under a Creative Commons Attribution 4.0 International License.

