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Market risk, corporate governance, and the regulation during the recent financial crisis: The French context

Mouna Aloui (Faculty of Economics and Management of Sfax, University of Sfax, Sfax, Tunisia)
Bassem Salhi (Majmaah University, Al Majmaah, Saudi Arabia)
Anis Jarboui (Institute of Business Administration of Sfax, University of Sfax, Sfax, Tunisia)

International Journal of Managerial Finance

ISSN: 1743-9132

Article publication date: 2 May 2019

Issue publication date: 30 September 2019

594

Abstract

Purpose

The purpose of this paper is to study the impact of some corporate governance mechanisms on the market risk (stock price return and volatility, exchange rate) and on the exchange rate and Treasury Bill during the financial crisis. In order to better clarify the firms’ resistance to financial crises, the effect of exchange rate, Treasury Bill and the market risk are also considered.

Design/methodology/approach

The study uses a sample data of the SBF 120 on a panel of 99 French firms over the period between 2006 and 2015 divided into three sub-periods: the first sub-period, which covers the period between December 31, 2006 and December 31, 2009, was characterized by the outbreak of the subprime crisis. The second sub-period considers the sovereign debt crisis in Europe between December 31, 2010 and December 31, 2012. The last sub-period includes the post-crisis period (December 31, 2013 to December 31, 2015). The GARCH and BEKK models are used to capture the effect of volatility and conditional heteroskedasticity of both corporate governance and market risk.

Findings

The paper found that during the financial crisis (first sub-period, the sovereign crisis period), the high shareholders’ protection had a positive and significant impact on the stock market returns. Furthermore, the shareholders’ protection, the Treasury Bill, the institutional investors, the board’s size, had a negative and significant effect on the stock returns volatility. During the post-crisis period, the high protection and the board’s size had a negative and significant effect on the volatility of the stock returns.

Research limitations/implications

This result implies that during the financial crisis, the high shareholders’ protection played a role in increases the stock market return and minimized the stock return volatility.

Practical implications

This study helps in improving the legal protection of investors and helps managers, shareholders and investors to evaluate their investments. This study also provides implications for policymakers and legal environment in order to evaluate the importance of the current corporate governance frameworks in place.

Originality/value

This result implies that the institutional investors, as the results suggest, should follow the shareholders’ protection in all the countries to make decisions about their investments since the high shareholders’ protection increases the firm’s stock returns and decreases the stock return volatility.

Keywords

Acknowledgements

The author would like to thank deanship of scientific research at Majmaah University for supporting this work under Project No. 55-1440.

Citation

Aloui, M., Salhi, B. and Jarboui, A. (2019), "Market risk, corporate governance, and the regulation during the recent financial crisis: The French context", International Journal of Managerial Finance, Vol. 15 No. 5, pp. 700-718. https://doi.org/10.1108/IJMF-06-2018-0177

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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