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Ownership Concentration, Board Structure and Credit Risk:The Case of MENA Banks

Rim Boussaada and Daniel Labaronne
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Rim Boussaada: FSJEG Jendouba, University of Jendouba, Institute of Management
Daniel Labaronne: LARE-efi, University of Montesquieu Bordeaux IV

Bankers, Markets & Investors, 2015, issue 139, 5-18

Abstract: This paper analyzes the impact of ownership concentration and board characteristics on MENA banks’ credit risk over the period 2004-2011. The sample includes 38 commercial banks belonging to ten countries of the MENA region. We use an econometric method that deals with the endogeneity problems that have arisen in the corporate governance literature. We show that ownership concentration is significant in explaining credit risk differences between MENA banks. Indeed, banks with highly concentrated ownership have a higher credit risk. However board size and CEO duality are not significant in explaining credit risk differences between MENA banks. In addition, the results highlight the fact that the independence of directors is not relevant to explaining risk-taking in MENA banks. We find that state directors exacerbate credit risk while institutional directors fulfill the functions of monitoring of the bank’s credit policy. Finally, our findings highlight the importance of the number of board committees in enhancing banks’ credit quality.

Keywords: Bank Governance; Ownership Concentration; Board of Directors; Credit Risk; MENA Banks (search for similar items in EconPapers)
JEL-codes: G21 G30 G32 G33 (search for similar items in EconPapers)
Date: 2015
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