Abstract:
This article studies the impact of regulation on banking governance. The results obtained show that, overall, regulation affects banking governance in the zone, but specifically, hard equity has a negative and significant effect on governance. Thus, an increase in Tier 1 capital means that regulation forces system players (owners or shareholders) to get involved in any risk-taking by the bank, and in turn, these players are obliged to monitor and watch over management to prevent them from flinching, which will ultimately lead to good governance. On the other hand, complementary equity capital has a positive and significant effect. When equity increases, the quality of governance deteriorates. This is largely due to the presence of subordinated debt. Consequently, in order to strengthen bank governance, the authorities must monitor and control the evolution of the proportion of subordinated debt in overall bank debt.
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