The impact of control quality on the non-performing loans of Tunisian listed banks

• Published in: Managerial auditing journal 2018-01, Vol.33 (1), p.2-15
• Main Author: Ben Saada, Moufida
• Format: Article
• Language: English
• Subjects: Audit committees; Audits; Banking industry; Boards of directors; Central banks; Chief executive officers; Committees; Credit risk; Developing countries; Institutional investments; Investors; LDCs; Literature reviews; Nonperforming loans; Regulation of financial institutions; Stockholders; Technology transfer
• ISSN: 0268-6902; 1758-7735
• DOI: 10.1108/MAJ-01-2017-1506

Purpose This paper aims to explore the extent to which the control quality impacts non performing loans (NPLs) of Tunisian listed banks by integrating the guidelines of Circular No. 2011-06 issued on 20 May 2011 by Tunisian Central Bank. Design/methodology/approach Regressions using panel data are applied on a sample of 11 listed banks during the period from 2010 to 2015. Findings The results show that the presence of foreign directors on the Tunisian bank board affects credit risk. These administrators, with knowledge, independence and technology transfer, exercise more control than institutional administrators or state representatives. The risk committee is more effective than the other committees (audit committee and credit committee) in reducing non-performing loans. The role played by this body is the most important. Practical implications Testing empirically the impact of control quality on NPL by integrating the guidelines of the Central Bank leads to a better evaluation of reforms’ application and effective measures to strengthen the banking governance practices. Originality value By exploring the application of the Central Bank’s guidelines for strengthening post-revolutionary banking governance practices, it becomes easy to assess the extent of the Circular No. 2011-06 by accounting practitioners, auditors and authority bodies to give the necessary recommendations for further reforms.