Governance Effect of Board of Directors on Banking Performance: Evidence From Tunisia

Sahbi Missaoui,Nizar Raissi

doi:10.5430/ijfr.v11n2p358

Abstract

The research tried to assess the impact of board characteristics on Tunisian bank's performance. The empirical study is based on a sample of 10 commercial banks during the period 2008-2017. Firstly, we proceed to estimate the impact of board characteristics on bank performance measured by Return on Assets (ROA) and Return on Equities (ROE) ratios. The estimation results achieved have positive and negative effects on the economic and financial bank's profitability. Hence, on the one hand, the estimate test gives a positive impact of ratio Market to book and the ratio Interest / Commissions in case of economic performance (VIC). On the other hand, these two ratios have a negative impact on performance measured by the ROE and ROA. Regarding the board and bank size, the estimate test gives a negative impact on economic profitability and a positive impact on financial profitability.

Highlights

Several authors insist that the role of the board of directors should not be ignored
According to the descriptive statistics reported in table (2), during the period 2008-2017, Tunisian banks recorded averages of 0.73% for the Return on Assets (ROA) and 18.18% for the Return on Equities (ROE)
We conclude that the presence of external independent directors seems to have a negative impact on accounting performance, these results are consistent with literature, notably Yermack (1996) and Agrawal, A., and Knoeber, C.R. (1996) who find that firms with a large number of external directors have a low book value

Summary

Introduction

Several authors insist that the role of the board of directors should not be ignored. The legislator gives a determining role to the board of directors who becomes responsible of effective governance mechanisms for authority benefit, Cazalet, R.L. There are other effective ways of controlling the opportunistic behavior of leaders within banks. In this context, it appears that the board of directors is an obligation under the law that must meet several conditions (the presence of several members, the existence of the subcommittee, and the independence of directors...), Nikita Andrievskiy & Elizaveta Khudko, (2015); Yulia Yelnikova, (2016). Since banks provide credit to businesses, it is important to look closely at internal governance mechanisms, Barth, J.R., and al. Since banks provide credit to businesses, it is important to look closely at internal governance mechanisms, Barth, J.R., and al. (2001); Parrat, F. (1997, 2003)

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