Banking Governance and Risk: The Case of Tunisian Conventional Banks

Houssem Rachdi, Mohamed Ali Trabelsi and Naama Trad

MPRA Paper from University Library of Munich, Germany

Abstract: Banks are in the business of taking risks. The 3 pillars of Basel II capital accord highlight the crucial role of informative risk disclosures in enhancing market discipline. The specific role and responsibilities of the board of directors or supervisory boards in banking institutions continue, however, to fuel debate. Findings of the literature are often inconclusive. The main contribution of this study is examining how board characteristics affect risk in banking industry. We explore this relationship by using many econometric approaches. The empirical analysis based on a sample of 11 Tunisian conventional banks over the period 2001-2011 reports the following results when using GLS RE: small and dual functions boards are associated with more insolvency risk but have no significant effect on credit and global risks. The presence of independent directors within the board generates an increase in global risk but has no significant effect on insolvency and credit risks. A lower CEO ownership has no significant effect with all measures of risks. Finally, banking capitalization is associated with more insolvency risk, and small size banks assume lower credit risk. These findings are performed by using a GMM in system approach.

Keywords: Board characteristics; Bank risk; Governance; GLS RE; GMM system (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2013, Revised 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published in REVIEW OF ECONOMIC PERSPECTIVES 4.13(2013): pp. 195-206

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:81273

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