The effect of corporate governance on banks’ risk-taking and performance in the mena countries

Resumo

At the country-level, some Middle East and North Africa (MENA) countries have recently implemented reforms in corporate governance to enhance their economy and improve management practices. At the firm-level, the banks in MENA countries has also been faced with increased competition locally and internationally, which forced them to implement and adopt corporate governance mechanisms and increase the level of rationale risk-taking and profitability to maintain their position in the market. The main objective of this thesis is to explore the relationship between corporate governance and risk-taking behavior and performance of banks operating in the (MENA) countries.In doing so, we use a dataset covering 165 banks located in 13 MENA countries over the period 2005-2012 and apply panel data methodology. The results suggest that good governance acting in the interests of shareholders could lead to excessive risk-taking. In this sense, a conflict of interest between the objectives of the monetary authority, interested in the solvency of the financial system, and shareholders, trying to maximize their benefit arises. The findinds also show that performance is strongly and positively influenced by country-level governance. On the basis of our results, we propose some policies to guide bank regulators and supervisors in MENA countries, which we consider the last and foremost contribution of this thesis.