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Does governance matter for bank stability? “MENA region case”

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  • Djebali Nesrine

    (Faculty of Law Economics and Management of Jendouba, University of Jendouba)

Abstract

This study aims to contribute to settling the lack of consensus regarding the determinants of bank stability, not only by considering the board of directors and the ownership structure but also by including factors such as CEO compensation, risk, and the audit committee. The objective of this paper is to examine the impact of internal governance on the bank stability index. To achieve this goal, we used the annual data of a sample of seventy-six listed banks observed during the period 1999–2017. We used panel data analysis to estimate our econometric model. Our study finds that the correlation between board size, the audit committee, and the presence of a block of institutional investors is positive and increases bank stability. On the other hand, we have found that the presence of external investors and CEO remuneration negatively affect the stability of the banks in our context. Regarding the macroeconomic and political environment, we indicate that inflation, gross domestic product, and institutional quality as measured by political stability have a positive effect on bank stability, while bank size negatively affects their stability. The results suggest managerial implications that can be of great value to ensuring the success of MENA banks.

Suggested Citation

  • Djebali Nesrine, 2023. "Does governance matter for bank stability? “MENA region case”," Journal of Asset Management, Palgrave Macmillan, vol. 24(4), pages 312-328, July.
    • Handle: RePEc:pal:assmgt:v:24:y:2023:i:4:d:10.1057_s41260-023-00308-1
    DOI: 10.1057/s41260-023-00308-1
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    More about this item

    Keywords

    Board quality; Ownership structure; Composite index; Bank stability; MENA region;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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