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Board characteristics and MENA banks' credit risk: A fuzzy-set analysis

Rim Boussaada (), Aymen Ammari () and Nouha Ben Arfa ()
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Rim Boussaada: University of Jendouba, Université de Tunis, GEF2A lab
Aymen Ammari: Avicenne private school, THEMA
Nouha Ben Arfa: ESTA School of Business and Technology, LAREFI, CEREN

Economics Bulletin, 2018, vol. 38, issue 4, 2284-2303

Abstract: This paper analyzes the relationship between bank governance mechanisms and credit risk in the MENA region. Methodology: Fuzzy-set qualitative comparative analysis (fsQCA) was used to analyze a sample of 38 commercial MENA banks for the period 2004-2015. Findings: We confirm that different combinations of governance mechanisms can yield similar levels of credit risk taking. A single board characteristic is not sufficient to explain the credit policy of MENA banks. The independence of the board appears to be a necessary condition for reducing credit risk. The high proportion of institutional directors is associated with higher credit risk taking. In addition, we find that CEO duality and the high proportion of foreign directors were substitutes for one another. Originality: This research presents an application analysis of fsQCA in the MENA region. We examine the role of optimal configurations of the boards of directors of MENA banks. Unlike techniques previously used to investigate bank governance, such as multiple regression analysis, the fsQCA approach reveals which governance practices are relevant, and which are redundant, for achieving effective control in credit risk management.

Keywords: Bank governance; board of directors; credit risk; MENA banks; fuzzy-set QCA (search for similar items in EconPapers)
JEL-codes: G2 G3 (search for similar items in EconPapers)
Date: 2018-12-02
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