Board of director’s Characteristics and Bank’s Insolvency Risk: Evidence from Tunisia

Abstract

Since the changes of banks’ environment at the end of the Eighties, Tunisian banks tried to expand their activities in order to provide suitable strategic answers to these changes but their performance indicators have greatly deteriorated. This underperformance was partly explained by the weak framework of corporate governance in Tunisian banks.

Our objective is to explore board of directors’ diversity as well as the presence of independent directors, the size of the board and its leadership structure on insolvency risk of Tunisian banks. The results show that demographic diversity enhances the insolvency risk of the Tunisian banks but cognitive diversity contributes to its reduction. The results show also that the size of the board of directors as well as duality have positive effects on the insolvency risk but the percentage of independent directors is associated with a lower risk.

Keywords: Banks, Insolvency risk, Board of directors, Diversity, Tunisia