Tunisian Stock Exchange Research Articles

Price limit bands, risk-return trade-offand asymmetric volatility: Evidence fromTunisian Stock Exchange sectors

This paper explores the impact of imposing various price limit bands on risk-return trade-off and asymmetric volatility on the Tunisian Stock Exchange (TSE). The study applies the EGARCH-M approach during the period spanning from 2 January 2019 to 31 January 2024, covering the periods before, during, and after the COVID-19 era. During the COVID-19 period, the TSE reduced the per-session price limit to protect investors from severe price fluctuations. Despite this protective measure, the results show that higher volatility is compensated by lower returns on all sectors’ returns. After the crisis, as a first step, the TSE widened the price limits, but subsequently, it narrowed them. The results show that the shift from the wider price limit regime to the narrow price limits regime structurally modifies volatility for small and large cap sectors.

The determinants of transfer pricing: Evidence from Tunisian listed firms

The aim of this paper is to detect the determinants of transfer pricing in the Tunisian economic context. This study uses secondary data from financial statments of listed firms on the Tunis Stock Exchange (BVMT), as well as the notes published in the official bulletins and annual reports provided by the Tunisian Financial Market Council (CMF).The study period covered 10 years, from 2010 to 2019 with 310 observations. We use random effect model to verify financial and economic hypotheses in the Tunisian context. Robustness tests are also used to investigate the transfer pricing determinants’. We find that firm size, sector of activity, reinvestment of profits and tax loss’ imputation have a significant positive impact on the practice of transfer pricing. The originality of this study lies in the importance of the transfer pricing at the level of local companies with the presence of several tax rates in the same tax system, a range of tax incentives granted by the government and the imputation of perpetual loss over several years.These findings may serve the Tunisian government in its fight against transfer pricing.

Can dividend announcement predict abnormal returns? Tunisia evidence

Purpose – The purpose of this paper is to observe whether the announcement of dividend distribution can affect the abnormal return on the Tunisian stock exchange. Design/methodology/approach – The sample includes 24 non-financial listed stocks in Tunisia Stock Exchange during the years 2004-2013. Company decides to announce its dividend payout policy to signal the market that the firm is now processing future prospects, which will result in changing its stock prices. Findings – The findings yield qualitatively consistent with the previous research. After controlling for the effect of the Politic Crisis in Tunisia during 2010-2013, the result shows that the stock prices move upward significantly after dividend announcements. Abnormal return (AR) and cumulative abnormal return (CAR) from the market model are statistically significantly revealed. Moreover, most event windows show that the stock return becomes lower when the investor sentiment for dividend is higher. Research limitations/implications – The result is limited to the absence of an important number of firms listed in TSE from this period. Practical implications – Investors in Tunisia show their preference for dividend to self-control, satisfaction and increase their profit. “This could be the catering incentive of the firm to decide to pay dividends”. Originality/value – This document provides evidence of Baker and Wurgler's (2002) proposed a new dividend theory; dividend catering theory, Bulan et al (2004) proposed the timing of dividend initiation, Thanwarat Suwanna (2012) document the impact of dividend announcement on stock returns. Even though the results indicate that Tunisian market react to the announcement of dividend by managers. Moreover, the timing of dividend initiation is affected by the investors’ sentiment, measured by the dividend premium. Tunisian investors react positively to the announcement to distribute dividend from firms especially in abnormal economic situation explained by the Tunisian politic crisis.

How does innovation moderate the CSR impact on financial performance? An exploratory study and an empirical validation in the Tunisian context

Purpose This paper aims to examine the effect of corporate social responsibility (CSR) on firm performance (FP) of companies listed on the Tunis Stock Exchange. Design/methodology/approach This paper reports on two empirical studies. The first was an exploratory qualitative study carried out on a sample of 30 Tunisian companies operating in different sectors. The second empirical study used a panel data regression analysis, to examine data from 46 companies listed on the Tunis Stock Exchange during the 2017 to 2021 period. Findings The results of the exploratory qualitative study pointed out the specificities of the Tunisian context as to the importance of CSR. The results highlighted also the importance of the 2018 CSR law in Tunisia, yet it drew attention to the non-implementation of its applying texts, meaning that CSR is not always enforced in the Tunisian context. Moreover, in this qualitative study, most companies confirmed that CSR is a key factor behind good governance practices. By studying the impact of CSR on various FP proxies, the results highlight that CSR has a positive and significant impact on FP measured by ROA as an accounting variable and stock returns as a market-measure variable. In addition, the authors confirm the moderating effect of innovation on the CSR and FP relationship. Indeed, innovation affects corporate FP differently. It hinders accounting-based FP while fostering the market-based one. Practical implications The study provides insights for managers into how CSR approaches can be used to maximize profits, improve its FP and reputation, while considering the corporate innovative capacities. CSR is a real performance lever for companies, a means of improving their economic, environmental and social efficiency. It enables companies to anticipate constraints and prevent risks, reduce certain operational costs, optimize resources, communicate a good image and stand out from the competition, gain easier access to innovation, strengthen their competitive edge, gain easier access to financing and strengthen their territorial and social roots. Originality/value The main contribution of this paper is the adoption of two empirical approaches. These two methods are complementary. The first is an exploratory qualitative approach aimed at better understanding the current state of CSR implementation by Tunisian companies. The second one is quantitative, a panel data regression analysis. Furthermore, the authors test the moderating effect of innovation on the studied link. To the best of the authors’ knowledge, this is the first paper that investigates the moderating effect of innovation on CSR FP in the Tunisian context. Finally, robustness tests were conducted to test the reliability of this study’s results.

Impact of COVID-19 Pandemic and Russo-Ukrainian War on Tunisian Stock Exchange Performance and Volatility

The purpose of our study was to investigate the impact of COVID-19 pandemic and the Russo-Ukraine (RU) war on the return volatility and value of the Tunisian Stock Exchange proxied by TUNINDEX. We applied GARCH (1,1) to assess the impact on the index return volatility, using daily observations from January 2019 to December 2022, and a multiple linear regression to determine the effect on the index value, based on monthly observations for January 2018 to December 2022. GARCH output revealed that both exogenous shocks led to higher stock market return volatility. The regression results disclosed statistically significant though opposite impacts on the index price. The pandemic exerted a positive, though extremely mild impact on the Index value, while the war had a negative effect on its performance. As for the control variables, both inflation rate and industrial production index exhibited positive effects on the TUNINDEX values, while trade balance had a negative impact. GDP growth rate and interest rate however, showed no significant influence on the index performance during the study period. We faced some difficulty accessing data, in addition to the scarcity of data on other potentially relevant factors, along with a short study period. Incorporating new variables i.e. mortality rates, unemployment due to the lockdown, travel bans effect, trade dependence with Ukraine and Russia, and using Time-Varying Vector Auto Regressive model may add additional value to our work. The paper contributes to the literature on external shocks impacts on stock markets, specifically on the Tunisian stock exchange. In addition, it offers insights on the potential expected economic effects of unpredicted events, and may help identify appropriate strategies to mitigate their dramatic effects. Finally, this research presents the first investigation on the impact of the Russian invasion on Ukraine on the Tunisian stock exchange by probing into the impact on both volatility and performance of the market’s index.

The impact of CEO power on corporate tax avoidance: the moderating role of institutional ownership

Purpose This study aims to investigate the relationship between chief executive officer (CEO) power and the level of tax avoidance of Tunisian listed companies. It also examines the moderating role of institutional ownership in this association. Design/methodology/approach The sample comprises 306 firm-year observations of companies listed on the Tunis Stock Exchange during the 2013–2020 period. Findings The results indicate that CEO power reduces tax avoidance levels. Moreover, the relationship between CEO power and tax avoidance is more pronounced in the presence of institutional ownership, suggesting that CEOs act less opportunistically when monitored by institutional investors, which results in a reduction in tax avoidance. Practical implications This study suggests that CEO power and institutional shareholders’ influence are important factors in determining firms’ avoidance behavior. This study has significant implications for shareholders and regulatory bodies. Indeed, shareholders apprehend the impact of appointing a powerful CEO on tax avoidance practices. This study may also provide regulators with new insights into the influence of CEO power dimensions and institutional ownership on tax aggressiveness. Originality/value This study fills the gap in the accounting literature by investigating how CEO power may impact tax avoidance behavior and provides empirical evidence on the moderating impact of institutional ownership on this relationship in an emerging economy context characterized by a weakly protected investor setting.

The Impact of Market Maker Competition on Price Efficiency Features in the Tunisian stock Market

The purpose of this study — is to determine the relationship between market maker competition and stock price efficiency in TSE (Tunisian Stock Exchange) market. The proxy for competition was determined as the number of market makers and the parameters investigated were transaction costs, information asymmetry and profit. The high positive correlation between competition and stock price efficiency is demonstrated by the negative impact of competition on all the variables studied. In addition, the price efficiency increased considerably after the introduction of new market makers by using the difference-in-difference (DID) model. Also, the competition between market makers has a significant negative impact on price efficiency through transaction costs, asymmetry information and level of experience. Thus, it can be concluded that the stock price efficiency can be improved by increasing the competition of market makers in Tunisia.

Do CEO duality and expertise affect earnings management behavior? The moderating effect of family ownership

PurposeThis study aims to analyze whether chief executive officer (CEO) duality and financial expertise are associated with earnings management to exceed thresholds. It also investigates to what extent and in what direction this association evolves when family ownership is introduced as a moderator variable.Design/methodology/approachBased on balanced panel data related to companies listed on the Tunis Stock Exchange, this study uses the logistic random-effect model to test research hypotheses during the period spanning from 2016 to 2021.FindingsThe results show that CEOs with financial expertise are less inclined to engage in earnings management to avoid reporting losses and earnings decline. The authors also provide evidence that CEO duality allows top management to be more powerful and, therefore, manage earnings to report positive profits and sustain recent performance. Furthermore, the authors find that family ownership moderates the association between CEO financial expertise, CEO duality and earnings management to exceed thresholds.Practical implicationsThe findings suggest to regulators involved in corporate governance and earnings management issues a reflection on CEO duality power, board effectiveness and family control. The study results are also of interest to auditors and board members as they provide a more in-depth understanding of the impact of CEOs' attributes and family control on financial reporting decisions.Originality/valueThis study extends past literature by providing new insights into the effect of CEO attributes and family control on earnings management practices in weak investor protection countries such as Tunisia.

Verbal Qualitative Information from Social Networks and Stock Performance of Tunisian Financial Companies

Social networks have invaded our world and changed the way we communicate. Even the financial world has turned to social media, with Twitter leading the way. As a result, social media is becoming an undeniable tool that affects the stock market. In this study, we consulted the articles published on the facebook page ilboursa of Tunis. The published articles contain an announcement of the news of the movements of the shares of the listed companies by using negative and positive words. Our database is composed by a manual counting of these qualitative verbal information. We used the list of words of the psychological dictionary "Harvard-IV-4". Our research focuses on 26 Tunisian financial companies listed on the Tunis Stock Exchange, over a one-year horizon, from 01 January 2015 until 31 December 2015. We used the GMM (Generalized Method of Moment) on dynamic panel. The generalized method of moments analyzes two models in which five days of delay of the dependent variable appear as explanatory variable. The results of the study are twofold. First, the Tunis stock exchange seems to react positively to positive qualitative information. Second, it reacts negatively to negative qualitative information. Among other things, the impact of stock returns on information is quite important. It is always necessary to master the tool of social networks to disseminate good and relevant qualitative financial information on the financial market.

Systemic Risk: A Comparative Study between Public and Private Banks

This paper aims to study the capital insufficiency in various Tunisian banks which are on the list of the Tunisian stock exchange market. Basing our work on the various measures of systemic risk, we have modeled the shortfall capital of the Tunisian banking sector in order to compare private banks and public ones in terms of exposure to systemic risk. We have also studied the effect of stock market shocks on the banks' marginal expected shortfall. The results obtained show that the systemic risk for the period 2006 and 2013 is mainly conveyed by the three public banks.

The determinants of firm profitability in the Tunisian Stock Exchange

Purpose — This research aims to analyze the determinants of firm profitability in the Tunisian Stock Exchange. Design/methodology/approach—This research used a panel static model on a sample of 30 firms listed on the Tunisian stock exchange from 2016 to 2021. Findings — The results show that capital, size, liquidity, and economic growth positively affect firm profitability, but inflation and financial autonomy negatively affect firm profitability. Practical implications—This scholarly article's practical implications are that organizations can improve their profitability by focusing on capital, size, liquidity, and economic growth while also being cautious about inflation and financial autonomy. Originality/value — This scholarly article's original value lies in examining the determinants of firm profitability in the context of Tunisian stock exchange-listed firms. It provides insights into the specific factors that influence profitability and their effects. Paper type — Case research

Tunisian corporate bond market liquidity: a qualitative approach

PurposeThis study aims to explore the failures of Tunisian secondary corporate bond market liquidity to understand the determinants of corporate bond market liquidity at large.Design/methodology/approachWe adopted a qualitative approach to studying the Tunisian Stock Exchange. Dealers’ perceptions were collected through semi-structured face-to-face interviews; the data was recorded, transcribed and thematically analysed.FindingsSecondary corporate bond market failures are due, in part, to microstructural choices – especially the use of an over-the-counter market as a trading venue. The absence of a corporate bond yield curve, a narrow investor base, market participants’ lack of financial education and authorities’ attitudes are equally responsible.Research limitations/implicationsThis study is useful to researchers, policymakers and practitioners, as it identifies microstructural and other factors affecting the Tunisian secondary corporate bond market. We interviewed only Tunisian dealers while ignoring other categories of market participants. Furthermore, a focus group discussion could have improved our understanding of the determinants of the Tunisian secondary corporate bond market.Originality/valueThis paper aimed to qualitatively discuss several issues related to the Tunisian secondary corporate bond market. To date, little academic research has addressed this topic in the illiquid and non-transparent corporate bond markets.

The interactive impact of tax avoidance and tax risk on the firm value: new evidence in the Tunisian context

PurposeThe purpose of this study is to examine the interactive impact of tax avoidance and tax risk on the firm value.Design/methodology/approachThis study covers 290 observations on non-financial corporations listed on the Tunisian Stock Exchange for the period ranging from 2008 to 2020, using the multiple linear regression technique.FindingsThe results show that tax avoidance positively affects the firm value while tax risk has a negative influence on the company value. More importantly, tax risk moderates the positive impact of tax avoidance on the firm value. Accordingly, tax avoidance must be considered in conjunction with tax risk when studying the effect on the firm value. The findings of additional analyses indicate that when tax avoidance is associated with a high level of tax risk, it negatively affects the firm value. Thus, investors negatively rate the high-risk tax avoidance.Research limitations/implicationsThe major limitation of this study is that it focuses only on Tunisian listed companies since their financial statements are publicly available. Although the sample is relatively small due to the problem of data availability, it is satisfactory owing to the twelve-year sampling period (from 2008 to 2020). Research implications- The results obtained are of great interest to researchers as they should be more careful in simply using effective tax rates as a measure of risky or aggressive tax avoidance.Practical implicationsThe findings may signal the need for Tunisian firm managers to consider spillovers when adopting risky tax avoidance strategies and to implement a tax risk management policy within the firm. They are also substantial for Tunisian regulators to create requirements for reporting risky tax avoidance practices in the company annual reports to protect the investors’ rights and the society interest in general. The results are also useful for the investors who would like to make good decisions with respect to tax planning strategies. It is not enough to rely on the Effective Tax Rate (ETR) to judge whether or not tax planning is risky. Volatile ETRs, as a proxy of the tax risk, can be useful for them in decision-making.Social implicationsThe results also highlight that risky tax avoidance decreases the firm value, and thus confirm the negative repercussions that such behavior can have not only on the firm, but also on the society in general, as the corporate tax contributes to covering the State public expenditure. Hence, it is considered a general concern.Originality/valueThe present study differs from others in the existing literature. In fact, it examines the joint effect of tax avoidance and tax risk on the firm value for Tunisian listed companies which are characterized by the predominance of agency conflicts between major shareholders and minor ones. Therefore, the authors seek to investigate if small shareholders can penalize risky tax avoidance practices by decreasing the firm value.

Voluntary disclosure quality, institutional ownership, and stock price volatility: Evidence from a frontier market

In this paper, we examine the impact of voluntary financial disclosure quality on the stock price volatility of non-financial firms quoted on the Tunis Stock Exchange. Empirically, we first test the impact of voluntary disclosure quality on stock price volatility. Then, we examine the combined effect of voluntary disclosure quality and institutional ownership on stock price volatility. We study a sample of 411 annual reports of non financial companies listed on the Tunisian stock exchange observed over the 2010–2019 period. The results show that voluntary disclosure quality has a negative impact on stock price volatility. Our results also show that the impact of voluntary disclosure quality on stock price volatility is still significantly negative even after incorporating institutional ownership into our empirical model to test the robustness of our results. Moreover, the positive impact of institutional ownership on stock price volatility is lessened by its indirect relationship with voluntary financial disclosure quality.

The Impact of Internal Governance Mechanisms on Tax Risk in Developing Countries: An Empirical Analysis

The purpose of this study investigates the impact of governance mechanisms, linked to the board of directors, on the tax risk of Tunisian listed companies. In order to empirically verify this relationship in the Tunisian context, we conducted a logistic regression with 8 banks listed on the Tunisian Stock Exchange during the period of 2008-2018. The overall results show that all the independent variables have a positive and non-significant impact on the probability of the presence of tax risk (with the exception of the dual management variable). Indeed, the variables size of the board of directors, the independence of its members and gender diversity have a positive and statistically insignificant impact on the probability of the presence of tax risk in Tunisian listed companies. On the other hand, the direction duality variable registers a positive and statistically significant correlation with the variable to be explained.

Foreign ownership and liquidity: evidence from a frontier market

PurposeThis study aims to provide empirical evidence on the impact of foreign share ownership on the liquidity of the Tunisian Stock Exchange (TSE).Design/methodology/approachThe authors hypothesize in the first strand that stock liquidity could be positively affected by foreign ownership based on the real friction channel. The authors then hypothesize in the second strand, based on the information friction channel, that foreign ownership's impact on stock liquidity could be insignificant or negative and that foreign investors raise the level of information asymmetry. A sample of 318 firm-year observations from Tunisia over the 2012–2017 period and a random-effects estimation were used. Moreover, using the 2SLS estimator, a robustness check framework was applied in order to address any potential reverse causality concerns.FindingsThe authors find strong evidence that higher foreign ownership improves stock liquidity. More specifically, firms with higher foreign ownership engender a lower bid-ask spread, a better stock ability to absorb a large amount of trading volume, and a larger depth. These findings are still valid when reverse causality concerns are addressed through the use of the 2SLS estimator.Originality/valueThe paper contributes to the existing literature by focusing on the ownership–liquidity relationship on a frontier market. It provides further empirical support that higher corporate governance quality reduces the information asymmetry problem and enhances stock market liquidity.

Board of directors and target price performance: evidence from Tunisia

PurposeThis article examines the link between the structure of the board of directors and target price accuracy using a sample of 51 listed firms on the Tunisian Stock Exchange over the period of 2011–2017.Design/methodology/approachIn this study, the authors used the generalised method of moments (GMM) model to control the endogeneity problem.FindingsAs a result, that model can serve as a signal in the forecasting process. The authors' results suggest that target price accuracy is negatively related to board independence, and dual Chief Executive officer (CEO). In addition, CEO compensation tends to exert a negative impact on target price error.Practical implicationsThe authors' findings are valuable for common investors because the findings can be useful in enhancing their capital allocation decisions by assigning higher weights to forecasts issued by firms with strong corporate governance systems. The authors' study also has practical implications for managers and policymakers. Specifically, the evidence provided herein suggests that firms with strong corporate governance mechanisms enhance the accuracy of market expectations, alleviate information asymmetry, and limit market surprises, especially in a context characterised by weak investor protection. The authors' results highlight the advantages of strong corporate governance in improving a firm's information environment and, therefore, are useful for the cost–benefit analysis of improving internal governance mechanisms. Additionally, the authors' results may prove useful to investors who can rely on the information provided by analysts for well-governed companies.Social implicationsThe authors' study contributes to the literature in both corporate governance and analysts' forecasts fields. The study provides additional evidence of the benefit of board quality attributes on target price accuracy in an emerging market characterised by high information asymmetry and weak investor protection. The authors' findings exhibit the effectiveness of board attributes in producing better financial information quality in Tunisia. This is useful for investors who may improve their capital allocation decisions by assigning greater weights to target price forecasts of companies with good governance quality, suggesting that good corporate governance is a credible signal of better financial information quality. These results have important implications for capital market regulators and corporate management in encouraging the implementation of good governance practices.Originality/valueThe authors attempted to assess whether corporate governance of listed firms are priced in the Tunisian context characterised by weak governance control and to highlight which mechanism is highly considered by independent financial analysts to build their forecasts.

Earnings management and audit report lag: The role of audit risk-Tunisian evidence

Research question: This study investigates and analyzes the influence of earnings management on audit report lag. It also intends to develop a thorough understanding regarding the mediating effect of audit risk on this relation. Motivation: The outcomes of this paper will help to bridge the knowledge gap related to this issue in developing countries due to the importance of audit delay as it relates to corporate transparency. Idea: The issue of reporting delay is important as it relates to corporate transparency. Data: This study is based on a sample consisting of 28 Tunisian companies listed in the Tunis Stock Exchange (TSE) over the periods 2005 to 2010 (pre-2011 revolution) and 2011 to 2017 (post-2011 revolution). Tools: Consisting of 364 observations for the whole period, Structural Equation Modeling (SEM) approach is applied and three models are developed to examine the direct and the indirect link between earnings management and audit report lag. Findings: The results show that firms which manage their earnings upward are more likely to accelerate the release of their financial statements. In addition, in the Tunisian context, audit risk mediates the relationship between earnings management and audit report lag. Contribution: This study extends the existing literature by examining the mediation effect of audit risk on the relationship between earnings management and audit report lag.

Political connections, related party transactions and firm performance: evidence from Tunisian context

PurposeThe purpose of this paper is to examine the effect of the presence of political connections on firm performance through related party transactions in Tunisia, a country where that is characterized by the Jasmin revolution in 2011.Design/methodology/approachThe study uses a sample of nonfinancial firms between 2008 and 2014 listed on the Tunis Stock Exchange and uses generalized least squares on panel data.FindingsFirst, the political connection and related parties' transaction enhances firm's market performance. Second, the study reveals that political connection moderates the relationship between the related party transactions and firm performance only in the period after revolution. Indeed, politicians seem to have used related party transactions to expropriate firms in a period of political instability. Finally, we show that politicians are more attracted by firms with higher market performance and with higher number of related parties' transactions.Practical implicationsThe empirical findings contribute to the current debate on the benefits and costs of political connections in emerging economies. It shows that political connections enhance market valuation of firms. However, political connection costs appear during political instability period.Originality/valueThis study addresses the interaction between related party transactions, political connections and firm performance. It is the first study to test if the related party transactions are used as a tool by politicians to expropriate firms.

Research on the Relationship between Audit Risk Assessment and Risk Governance: Evidence from Tunisia

ABSTRACT The study examines the relationship between corporate governance mechanisms and audit risk in firms listed on the Tunisian Stock Exchange (TSE). The study covers the period 2006–2013. Panel regression analysis was used to estimate the relationship between corporate governance variables and audit risk. The results show that board size, board independence and institutional ownership were negatively related to audit risk. It is also discovered that audit risk index level increases as poor corporate governance. These findings may have important implications for analysts, investors, regulators and academics. First, the identifying factors that may influence the audit risk can help guide the reforms to improve the functioning of the financial market. Second, the study provides ample evidence of risk governance problems in the Tunisian market, highlighting the necessity of new corporate governance requirements. This study is unique in providing Tunisian evidence on the effect of corporate governance on audit risk. This paper is also relevant as it develops an index of audit risk and risk corporate governance.