Abstract
This study aims to determine the relationship between several factors of governance and the level of risk in 10 Tunisian banks during an analysis period of eight years. We propose an important empirical question and examine the internal mechanisms of governance aimed at reducing financial risks. This estimation is based on a model with a single equation that examines variables relative to governance and credit risk to determine their impact on banking financials. Results demonstrate that the internal mechanisms of governance present diverging effects on the financial risk of the Tunisian banks in our case study (i.e., credit risk). Moreover, making applications work by putting together a process and model for banking risk is important. This model can be applied in any bank, and the results can be used to make decisions in real time.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Adams R, Mehran H (2003). Is corporate governance different for bank holding companies? Economic Policy Review, 9(1): 123–142
Agrawal A, Jaffe J F, Mandelker G N (1992). The post-merger performance of acquiring firms: a re-examination of an anomaly. Journal of Finance, 47(4): 1605–1621
Beltratti A, Stulz R M (2012). The credit crisis around the globe: Why did some banks perform better? Journal of Financial Economics, 105 (1): 1–17
Brickley J A, Coles J L, Jarrell G (1997). Leadership structure: separating the CEO and chairman of the board. Journal of Corporate Finance, 3(3): 189–220
Brown P (2011). International Financial Reporting Standards: What are the benefits? Accounting and Business Research, 41(3): 269–285
Cornett M M, Mcnutt J J, Tehranian H (2009). Corporate governance and earnings management at large US bank holding companies. Journal of Corporate Finance, 15(4): 412–430
Council F R (2010). The UK Corporate Governance Code. London: Financial Reporting Council
Dahya J, Dimitrov O, Mcconnell J J (2008). Dominant shareholders, corporate boards, and corporate value: a cross-country analysis. Journal of Financial Economics, 87(1): 73–100
DeYoung R, Torna G (2013). Nontraditional banking activities and bank failures during the financial crisis. Journal of Financial Intermediation, 22(3): 397–421
Fama E F (1985). What’s different about banks? Journal of Monetary Economics, 15(1): 29–39
Ferrarini B, Scaramozzino P (2015). The product space revisited: China’s trade profile. World Economy, 38(9): 1368–1386
Hermalin B E, Weisbach M S (2001). Boards of directors as an endogenously determined institution: a survey of the economic literature. Economic Policy Review, 9(1): 7–26
Hopt K J (2013). Corporate governance of banks and other financial institutions after the financial crisis. Journal of Corporate Law Studies, 13(2): 219–253
Jemmali M, Alharbi M, Melhim L K B (2018). Intelligent decision-making algorithm for supplier evaluation based on multi-criteria preferences. In: 2018 1st International Conference on Computer Applications & Information Security (ICCAIS), IEEE, 1–5
Jensen M C (1993). The modern industrial revolution, exit, and the failure of internal control systems. Journal of Finance, 48(3): 831–880
Kirkpatrick G (2009). The corporate governance lessons from the financial crisis. OECD Journal: Financial Market Trends, 2009(1): 61–87
Kryvko A, Reichling P (2012). Corporate governance and performance of European commercial banks. In: International Conference on Improving Financial Institutions: The Proper Balance between Regulation and Governance, Helsinki
Laeven L, Valencia F (2013). The real effects of financial sector interventions during crises. Journal of Money, Credit and Banking, 45(1): 147–177
Lefort F, Urza F (2008). Board independence, firm performance and ownership concentration: evidence from Chile. Journal of Business Research, 61(6): 615–622
Levin R (2004). Finance and growth: theory and evidence. NBER Working Paper, 10766
Mehran H, Mollineaux L (2012). Corporate governance of financial institutions. Annual Review of Financial Economics, 4(1): 215–232
Melhim L K B, Jemmali M, Alharbi M (2018). Intelligent real-time intervention system applied in smart city. In: 2018 21st Saudi Computer Society National Computer Conference (NCC), IEEE, 1–5
Minton B A, Taillard J, Williamson R G (2011). Do independence and financial expertise of the board matter for risk taking and performance? Fisher College of Business Working Paper No. 2010-03-014
Pearl-Kumah S, Sare Y A, Bernard B (2014). Corporate governance and risk management in the banking sector of Ghana. European Journal of Accounting Auditing and Finance Research, 2: 1–17
Salhi B, Boujelbene Y (2012). Effect of internal banking mechanisms of governance on the risk taking by the Tunisian banks. International Journal of Economics, Finance and Management, 1
Whidbee D A (1997). Board composition and control of shareholder voting rights in the banking industry. Financial Management, 26(4): 27–41
Yermack D (1997). Good timing: CEO stock option awards and company news announcements. Journal of Finance, 52(2): 449–476
Acknowledgements
The author would like to thank the Deanship of Scientific Research at Majmaah University for supporting this work.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Jemmali, M., Salhi, B. Corporate governance impact on banking risk. Front. Eng. Manag. 7, 182–195 (2020). https://doi.org/10.1007/s42524-019-0034-3
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s42524-019-0034-3