Corporate Governance in Banks and its Impact on Credit and Liquidity Risks: Case of Tunisian Banks

Abstract

Given the crucial role played by banks in a developing country like Tunisia, it is important to maintain their stability. The purpose of this article is twofold. First, it studies the effect of banking governance on credit risk. Second, it tests the relationship between bank governance mechanisms and liquidity risk. In this article, we have combined literature regarding two areas of governance, first, ownership structure and board characteristics, and second, their impact on banking risks. To achieve this goal, we used a sample of 10 Tunisian banks observed during the period 1998-2015. The econometric approach used in this study is based on both the fixed and random effects models of panel data analysis. Our results show that credit risk and liquidity risk are directly related to bank governance mechanisms. These findings enable bank managers to better understand the factors influencing bank risk and serve as a basis for regulations to strengthen bank governance.