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The influence of politically connected CEOs on performance and credit risk: evidence from post-revolution Tunisia's banking sector

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  • Samar Riahi
  • Nadia Loukil

Abstract

PurposeThis study examines how CEO political connections affect bank performance and credit risk in Tunisia (2012–2023), while assessing the moderating roles of governance reforms, ownership structure and the COVID-19 crisis.Design/methodology/approachUsing GLS estimations on a sample of listed banks, we test interaction effects and validate robustness through alternative performance (ROE, Z-score and capital ratio) and risk (LLP) indicators.FindingsPolitical ties significantly reduce profitability and increase credit risk. However, the 2016 banking reform offsets these effects by strengthening governance. Public ownership is associated with higher risk, but not correlated with lower performance. During COVID-19, connected banks faced less credit risk, likely due to privileged public support.Practical implicationsResults stress the need for strong governance and independent oversight to limit political interference and ensure banking stability.Originality/valueThis research provides novel evidence from a post-revolution emerging market by linking political connections with institutional reforms and external shocks.

Suggested Citation

  • Samar Riahi & Nadia Loukil, 2025. "The influence of politically connected CEOs on performance and credit risk: evidence from post-revolution Tunisia's banking sector," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 17(6), pages 1045-1063, October.
    • Handle: RePEc:eme:rbfpps:rbf-03-2025-0126
    DOI: 10.1108/RBF-03-2025-0126
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