Corporate governance and systemic risk of Tunisian banks

Abstract

This paper studies the relationship between systemic risk measures and internal governance mechanisms of banking institutions and managers' entrenchment level. Our study examines a sample of 11 Tunisian listed banks over the 2006 to 2013 period. The aim is to determine systemic banks, the main governance internal mechanisms and managers' entrenchment level that contributed to attenuating or amplifying individual and overall systemic risk. The empirical results indicate that the internal governance mechanisms of banking institutions are positively associated with the long run marginal expected shortfall (LRMES), and that the presence of a risk management committee has no effect on the level of systemic risk incurred by banks. However, the regression on the LRMES and the firm's percentage of financial sector shortfall reveals that the respect of the norms of governance of the banking institutions leads to the minimisation of the individual contribution of the banks to the overall systemic risk of the Tunisian banking sector.