Title: Agency conflicts between business owners and managers: empirical evidence from Tunisia

Authors: Mariem Amamou; Kais Ben-Ahmed

Addresses: Laboratory Research for Economy, Management and Quantitative Finance (LaREMFiQ), University of Sousse, Tunisia; Institut Supérieur de Gestion, Rue abdelaziz el-béhi BP 763, Sousse 4000, Tunisia ' Laboratory Research for Economy, Management and Quantitative Finance (LaREMFiQ), University of Sousse, Tunisia; Institut Supérieur de Finances et de Fiscalité, BP 436 Av. 18 Janvier 1952, Sousse 4000, Tunisia

Abstract: This paper proposes a solution to reduce agency conflicts which arise between managers and owners. We examine the relationship between managerial implication and firm performance. A structural model was applied to ten Tunisian banks covering the period 2000-2015 to test both managerial involvements on risk and performance. Results showed the relevant role of managers' implication in reducing conflicts of interest. Specifically, where managers are weakly involved, managerial implication creates more value for the shareholders. Furthermore, the relationship between firm performance and managerial implication depends on the level of risk-taking by the managers and approaches zero at a critical bank risk equal to 20.55%. Similarly, the relationship between risk and share of managers vanishes at a critical performance point equal to 42.70%. Overall, our findings call for implementing performance management system to help banks better manages their employee's performance and in turn, reduces conflicts between managers and owners.

Keywords: agency conflict; manager implication; risk; performance management; Tunisian banks; Tunisia; risk-taking.

DOI: 10.1504/IJBPM.2019.096463

International Journal of Business Performance Management, 2019 Vol.20 No.1, pp.34 - 45

Received: 18 Mar 2017
Accepted: 04 Jan 2018
Published online: 04 Dec 2018 *

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