The existing literature provides conflicting views of the relationship among board characteristics; performance (Return on Assets and Return on Equity) and bank risk taking (Z-score). The relation between characteristics of corporate boards, firm performance and risk taking continues to be a fundamental issue in the corporate governance literature. Findings of this literature are often inconclusive. The main contribution of this study is an analysis of how board characteristics affect performance and incentives to take risk in banking industry. We explore this relationship by using both generalized least square (GLS) random effect (RE) and generalized method of moments (GMM) system approaches. The empirical analysis based on a sample of 11 large Tunisian commercial banks during 1997-2006, reports the following robust results: a small bank board is associated with more performance and with more bank risk-taking, the presence of independent directors within the board of directors affects negatively the performance, but has no significant effect on the risk-taking, a lower CEO ownership is associated with lower performance in Tunisian banks, banks with high charter value are associated with lower ROA and ROE and more bank risk and the small size banks institutions appear to assume lower risks. Our results support the idea, commonly accepted, that bank board structure is a determinant factor for bank performance and bank risk taking.
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