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Abstract:
The authors study the dividend policy of 48 firms listed on the Tunisian Stock Exchange during the period 1996-2002. The study tests whether or not managers of Tunisian listed firms smooth their dividends. Moreover, the study outlines the main determinants that may drive the dividend policy of Tunisian quoted firms. To answer the first question, we use Lintner's model in a dynamic setting. The results clearly demonstrate that Tunisian firms rely on both current earnings and past dividends to fix their dividend payment. However, the study shows that dividends tend to be more sensitive to current earnings than prior dividends. To find out the determinants of dividend policy, dynamic panel regressions have been performed. First, profitable firms with more stable earnings can afford larger free cash flows and thus pay larger dividends. Furthermore, they distribute larger dividends whenever they are growing fast. However, neither the ownership concentration nor the financial leverage seems to have any impact on dividend policy in Tunisia. Also, the liquidity of stock market and size negatively impacts the dividend payment. The results are somewhat robust to different specifications.

Abstract:
The authors study the dividend policy of 48 firms listed on the Tunisian Stock Exchange during 1996-2002 period. The study tests whether managers of Tunisian listed firms smooth their dividends or not. Beside, the study outlines the main determinants that may drive the dividend policy of Tunisian quoted firms. To answer the first question, we use Lintner's model in a dynamic setting. The results clearly demonstrate that Tunisian firms rely on both current earnings and past dividends to fix their dividend payment. However, the study shows that dividends tend to be more sensitive to current earnings than prior dividends. To find out the determinants of dividend policy, dynamic panel regressions have been performed. First, profitable firms with more stable earnings can afford larger free cash flows and thus, pay larger dividends. Furthermore, they distribute larger dividends whenever they are growing fast. However, neither the ownership concentration nor the financial leverage seems to have any impact on dividend policy in Tunisia. Besides, the liquidity of stock market and size negatively impacts the dividend payment. The results are somewhat robust to different specifications.

Dividend policy, dynamic panel data, corporate governance, partial adjustment model, dividend policy

Abstract:
This paper investigates the impact of banks’ characteristics, financial structure and macroeconomic indicators on banks’ net interest margins and profitability in the Tunisian banking industry for the 1980-2000 period. Individual bank characteristics explain a substantial part of the within-country variation in bank interest margins and net profitability. High net interest margin and profitability tend to be associated with banks that hold a relatively high amount of capital, and with large overheads. Size is found to impact negatively on profitability which implies that Tunisian banks are operating above their optimum level. On the other hand, we found that macroeconomic variables have no impact on Tunisian bank’s profitability. Turning to financial structure and its impact on banks’ interest margin and profitability, we find that stock market development has a positive effect on bank profitability. This reflects the complementarities between bank and stock market growth. We have found that the disintermediation of the Tunisian financial system is favourable to the banking sector profitability. On the ownership side, we reach the conclusion that private banks tend to perform better than state owned ones. Finally, interest rate liberalization has contrasting effect on net interest margins. In fact, partial liberalization has a negative impact on the interest margin whereas complete liberalization strengthens the ability of Tunisian banks to generate profit margins.

bank interest margin, bank profitability, panel data, Tunisia

Abstract:
This paper investigates the impact of banks' characteristics, financial structure and macroeconomic indicators on banks' net interest margins and profitability in the Tunisian banking industry for the 1980-2000 period. First, individual bank characteristics explain a substantial part of the within-country variation in bank interest margins and net profitability. High net interest margin and profitability tend to be associated with banks that hold a relatively high amount of capital, and with large overheads. Second, the paper finds that the inflation has a positive impact on banks' net interest margin while economic growth has no incidence Third, turning to financial structure and its impact on banks' interest margin and profitability, we find that concentration is less beneficial to the Tunisian commercial banks than competition. Stock market development has a positive effect on bank profitability. This reflects the complementarities between bank and stock market growth. We have found that the disintermediation of the Tunisian financial system is favourable to the banking sector profitability.

bank interest margin, bank profitability, panel data, Tunisia

Abstract:
Through a cross sectional analysis of 48 firms, over a seven-year period, from 1996 to 2002, we try to shed some light into two sides. First of all, we research whether managers smooth their dividend policies or not. Besides, we outline the main determinants that may influence the dividend policy pattern. Specifically, we attempt to find answers to the following questions: Do Tunisian firms follow stable dividend policies or not? Do dividend yields differ across industries? What are the main factors that determine the dividend policy making? In the first section, Lintner's model is applied. Our results show that Tunisian firms rely on both current earnings and past dividends. However, it seems that dividends tend to be more sensitive to current earnings than prior dividends. Any variability in the earnings of the corporation is directly reflected in the level of dividends. However, dividend policy does vary across financial and non-financial industries. Our results uncover a low target payout ratio of respectively 16% and 27% for non-financial and financial firms while the adjustment speed respectively ranges from 0.68 to 1.56. Non-financial institutions adopt therefore a more smoothing dividend policy. Secondly, through a fully developed model, we highlight some factors that may influence the dividend policy pattern. First, riskier firms with high financial leverage pay out fewer dividends and have lower dividend yields. Furthermore, high-profitability firms with more stable earnings can also afford more dividends. However, larger investment opportunities deprive firms from higher dividends. Similarly, growing firms distribute fewer dividends. Additionally, dividends serve to reduce agency costs between the shareholders themselves only whereas the conflicts between insiders and outsiders seem to be not resolved with dividends. This matter holds true only in non-financial firms. In this vein, it should be noted that our analysis does show significant differences throughout financial versus non-financial industries. Finally, the size of Tunisian corporations has a systematic negative effect on dividend policy.

dividend policy, dynamic panel data and Tunisia

Abstract:
The Capital Asset Pricing Model (CAPM) has dominated finance theory for over thirty years; it suggests that the market beta alone is sufficient to explain security returns. However evidence shows that the cross-section of stock returns cannot be described solely by the one-factor CAPM. Therefore, the idea is to add other factors in order to complete the beta in explaining the price movements in the stock exchange. The Arbitrage Pricing Theory (APT) has been proposed as the first multifactor successor to the CAPM without being a real success. Later, researchers (Banz, 1981; Rosenberg et al., 1985; Jegadeesh and Titman, 1993) support that average stock returns are related to some fundamental factors such as size, book-to-market equity and momentum. Alternative studies come as a response to the poor performance of the standard CAPM. They argue that investors choose their portfolio by using not only the first two moments but also the skewness and kurtosis. The main contribution of this paper is to choose between the CAPM, the Fama&French asset pricing model (TPFM) and the Four Factor Pricing Model (FFPM) adding the third and fourth moments to estimate the cost of equity of Tunisian listed firms. The selection of the best model is based on Information Criteria: the Akaike Information Criteria (AIC) and the Schwartz Information Criteria (SIC). The simple FFPM of Cahart turned out to be the selected model. Therefore, we used the random coefficient model of Swamy to account for inter-individual heterogeneity and to estimate the coefficients on the FFPM factors. The final results show that costs of equity estimated by the simple FFPM differ by more than 4 percent across the six industries, ranging between 4.33 percent for agro-alimentary sector and 8.55 percent for insurance companies.

Cost of equity, CAPM, TFPM, FFPM, Skewness

Abstract:
Since few decades, a wide theoretical debate is concerned with the fundamental relationship between financial development and economic growth. An efficient financial system leads to a sustainable economic growth. In this study, we are interested especially with stock markets as a main component of the financial system according to the increasing role of financial markets in economies. So, their evolution plays an important role in economic growth. We shed some light on the macroeconomic determinants which must have an important influence on stock markets development. It is recognized that real or financial variables such as real income, saving rate, credit to private sector, M3, value traded, turnover, etc. could have a significant impact on market capitalization. The empirical study is conducted using an unbalanced panel data from twelve MENA region countries. Econometric issues are based on estimation of some fixed and random effects specifications. With such specifications in mind, peculiarities of MENA region countries are detected as well as differentiations among them. Thus, differences in market capitalization are explained. The empirical expected results must reinforce the idea which suggest the important role of economic development in promoting stock market development. Explaining power of variables such as real income, saving rate, inflation, financial intermediary development and stock market liquidity is confirmed. Banks and stock markets seem to be complements instead of substitutes.

stock market development, fixed effects model, random effects model, MENA region

Abstract:
In 1991, the Central Bank of Egypt increased the minimum capital requirements for the banking industry vis-a-vis risk weighted assets to 8 percent, along the lines of the Basle Committee on Banking Supervision. We investigate the effects of capital regulations on cost of intermediation and profitability. A number of factors have pushed up an increase in the cost of intermediation in the post-capital regulation period: higher capital to assets ratio, an increase in banks' size and a reduction in inflation. The reduction in banks' concentration and output growth countered these effects. A number of factors contributed positively to banks' profitability in the post-regulation period: higher capital requirements, the reduction in implicit cost and the increase in banks' size. The reduction in economic activity had counter effects on bank's profitability. Overall, the results support the Central Bank's efforts to enforce capital regulations towards improving the performance of the banking sector in Egypt.

Cost of intermediation, profitability, capital regulation, dynamic panel data

Abstract:
This study examines the technical efficiency of the Tunisian banking system in pre, during and post-financial liberalization, starting in the early of 1980s. As well we propose a benchmarking between Tunisian and OECD countries banking industry. A non-parametric method of Data Envelopment Analysis (DEA) has been used to arrive at the efficiency scores for a panel data sample covering 9 Tunisian commercial banks and the commercial banks of 10 OECD countries, over the period 1980 to 2001. The findings demonstrate that financial liberalization in Tunisia starts to give the expected effects, and suggest that a further restructuring and modernization in the market will eventually lead to more efficiency in the Tunisian banking sector. Another finding of the study shows that the efficiency level of these banks is comparable to the one of banks in Iceland, Mexico and Turkey after liberalization.

Efficiency, Banking, Liberalization, benchmarking, Data Envelopment Analysis

Abstract:
Since few decades, a wide theoretical debate is concerned with the fundamental relationship between financial development and economic growth as well as the separate impact of banks on growth and financial markets on growth. Recent studies shed some light on the simultaneous effect of banks and financial development on growth. The empirical study is conducted using an unbalanced panel data from ten MENA region countries. Econometric issues will be based on estimation of a dynamic panel model with GMM estimators. Thus, peculiarities of MENA region countries will be detected. The empirical results reinforce the idea of no significant relationship between banking and stock market development, and growth. The association between stock markets and growth is even negative after controlling for bank development. This lack of relationship must be linked either to underdeveloped financial systems in the MENA region that hamper economic growth or to unstable growth rates in the region that affect the quality of the association between finance and growth. Moreover, in most transition economies the stock markets are very thin. This may lead to excessively volatile share prices. According to Singh (1997), stock price volatility may seriously hamper economic development.

bank development, stock market development, economic growth, dynamic panel

Abstract:
The paper works with a sample of 95 newly privatized firms (NPFs) that went public through stock markets in four Middle East and North Africa countries (Egypt, Morocco, Tunisia and Turkey). We find that these firms experience significant increase in profitability and operating efficiency, and significant decline in employment and leverage. We also document strong performance improvements for firms that not relinquish control from the state, that are not sold to foreigners and that come from Egypt. Employment decline is more severe in Egypt and in firms where the state is no longer in control. Also, the results indicate that revenue firms and NPFs in Morocco yield significantly less leverage than control firms and those from other countries. As for the sources of these performance changes, we find that profitability change is negatively related to control relinquishment by the government and positively related with foreign ownership. Trade openness, change in real GDP over the privatization window, index of investor protection and foreign ownership are important determinants of the change in sales efficiency and output changes. These findings suggest that NPFs become more productive in environments where property rights are better protected and enforced and that foreign investors influence the firm's productivity through their monitoring role.

Privatization, Ownership Structure, Corporate Governance, Economic Liberalization, and MENA Countries.

Abstract:
The objective of this paper is to test the impact of the accounting reform on the value relevance of financial information in the Tunisian Stock Exchange (TSE). Specifically, the study examines whether the market's valuation of earnings and book values improve investors' decisions after the implementation of the accounting reform. Using a sample of Tunisian firms traded on the Tunisian Stock Exchange during the period 1992-2001, we investigate the relation between the firms' stock prices and their book values, earnings, and cash flows before and after the accounting reform. Our results show that earnings, cash flows and book values are positively and significantly related to security prices. In addition, we find that the value relevance of these variables have significantly improved after the 1997 accounting reform, even after controlling for the effect of scale factor in our price model. Finally, we find that some factors supposed to impact on the value relevance in Tunisia such as firm size and branch of activity, have no incidence on the improvement of value relevance in Tunisia following the accounting reform.

accounting reform, value relevance, information content, financial variables

Abstract:
In spite of popularity and theoretical simplicity of the one-factor Capital Asset Pricing Model (CAPM) used in the valuation of financial assets, researchers are more concerned with the important extension proposed by Fama and French (1993), that is, the Three-Factor Pricing Model (TFPM). Alongside beta, average stock returns could be explained by some size and book-to-market supplementary effects. With these two complementary models, estimation of the cost of equity is carried out for the Tunisian banking sector. In order to account for inter-individual heterogeneity, estimation of parameters is conducted according to random coefficient specifications within the context of panel data analysis.

Abstract:
In spite of popularity and theoretical simplicity of the one-factor CAPM used in the valuation of financial assets, more attention is now made to the important extension proposed by Fama and French [1993] rising the Three-Factor Pricing Model (TFPM). Alongside beta, average stock returns could be explained by some size and book-to-market supplementary effects. With these two complementary models, estimation of cost of equity is carried out for the Tunisian banking sector. To account for inter-individual heterogeneity, estimation of the coefficients is conducted according to random-coefficient specifications within the context of panel data analysis.

cost of equity, CAPM, TFPM, banking sector, random-coefficient model

Abstract:
Coordinating macroeconomic policies is a pre-requisite to a successful launch of the common currency in the GCC countries. Relying on the Behavioral Equilibrium Exchange Rate approach as a theoretical framework, we apply the Pooled Mean Group methodology to determine the similarity of the impact of a selected set of macroeconomic indicators on the real exchange rate in each country. Our empirical evidence points to a clear coordination of monetary policy, fiscal policy, government consumption, and openness across the member countries. While RER misalignments also show a substantial convergence building over time, differences in the misalignments of the two polar cases remain rather substantial, calling for further coordination and policy harmonization.

Working Paper, Cooperation Council for the Arab States of the Gulf, Monetary unions, Monetary policy, Financial integration, Foreign exchange, Economic policy, Central bank policy

Abstract:
In order to investigate the impact of financial market liberalization on economic growth in the MENA region, we need to replace our contribution in the economic growth literature. Our study is related to the literature on policy impacting growth rather than the debate on "convergence" between low-income and high-income countries which dominates the current research on economic growth. Our study is one of the few studies that focus on MENA countries. Several issues are addressed about the impact of stock market liberalization on economic growth. Using annually data from 11 MENA countries over the 1979-2005 period, the empirical results indicate that stock market liberalization has no effect on economic and investment growth whereas the impact on stock market development is negative in the short-run but turns positive in the long-run. However, when we include certain pre-conditions for liberalizing the stock market, we find that a more developed stock market prior to liberalization, less government intervention and by not fully opening the economy to foreign trade reinforces the positive impact of liberalization on stock market development. These results could have some important policy implications; in which domestic financial reforms should precede policies that aim at liberalizing the stock market. This is not only easier and faster to accomplish, but from a policy sequencing perspective it pays to reform the trade regime before liberalizing fully the (portfolio component of the) capital account. In conclusion, reforms should first and foremost start in the domestic economy before open it full to foreign participation. Our results are robust to several specifications.

Stock Market Liberalization, Economic and Investment Growth, Financial and Banking Sector Development, Dynamic Panel Data, MENA Countries

Abstract:
In 1988, an agreement was reached in Basel to set the common requirements of bank capital towards promoting the soundness and stability of the international banking system. Banks are required to hold capital in proportion to their perceived credit risks, which may have caused a "credit crunch," resulting in a significant reduction in the supply of credit. We investigate the direct link between the implementation of the Basel Accord and lending activities using a data set spanning annual observations covering 1989-2004 for banks in Egypt, Jordan, Lebanon, Morocco, and Tunisia. The results provide clear support for a significant increase in credit growth following the implementation of capital regulations, in general. Despite higher capital adequacy ratio, banks expanded credit and assets growth. Credit growth appears to be driven by demand fluctuations attributed to real growth, cost of borrowing and exchange rate risk. Overall, the effects of macroeconomic variables, in contrast to capital adequacy, appear to be more dominant in determining credit growth, regardless of the capital adequacy ratio, and variation across banks by nationality, ownership, and listing.

Basel accord, capital requirement, lending behavior, panel data models

Abstract:
This paper presents empirical evidence from a representative sample of Tunisian firms on the importance of loan officers in the production of 'soft information' by opposition of 'hard' information, testing whether firm borrowers have a relationship with their bank or with their loan officer. To establish the main determinants of the credit conditions in Tunisia, our study is based on a sample of 297 companies, dealing with a Tunisian bank over 1998 to 2002. The main finding of this paper is that the risk premium depends only on the hard information proxies. However, the availability of credit seems related to the interaction between the loan officer and the customer through the collection of 'soft' information.

Lending Relationship, Risk Premium, Credit Availability, Panel data, Tobit model

Abstract:
This study gives some issues concerning the relationship between inflation and the financial sector performances for some MENA region countries. The negative association is confirmed through the estimation of a dynamic panel model using the GMM methodology. On the other hand, a threshold effect is also identified in order to show that negative effect of inflation on financial sector becomes effective once the rate of inflation exceeds some threshold. Globally, we find that inflation has a negative and significant incidence on financial sector development but with no evidence of thresholds levels even after controlling for simultaneity and omitted variable biases. In other words, we show that a marginal increase of inflation is harmless to stock market performance and banking sector development whatever the rate of inflation.

cfinancial sector performances, inflation, dynamic panel data, MENA region.

Abstract:
Relatively little empirical evidence is available that estimates the relationship between asset price movements and monetary policy measures. This paper, which is the first study that focus on the linkage between monetary policy and stock market prices, aims at analyzing the interaction between monetary policy and asset markets in eight MENA countries. The countries that have to be considered in this study are: Bahrain, Egypt, Jordan, Morocco, Oman, Saudi Arabia, Tunisia, and Turkey. To this end, VAR methodology is used. The nature of the relationship between asset prices movements and monetary policy is currently a hotly debated topic in macroeconomics. The chief findings this study puts forward are the following: (i) In Bahrain, Oman, Jordan and Saudi Arabia the monetary policy seems to have a significant impact on stock market returns. (ii) The monetary policies of Tunisia, Morocco and to a less extent that of Egypt do not impact significantly on equity prices. (iii) Better still, the monetary policies' reactions, to stock market prices movements, are far from being homogenous across countries. While Saudi Arabia and Jordan monetary authorities respond vigorously to an increase in stock market returns, the other countries do not seem to exhibit any reaction. The paper attempts to put forth some explanations.

Monetary policy, Stock market, MENA countries, VAR methodology

Abstract:
This study examines the effect of financial sector reform on bank performance in selected Middle Eastern and North African (MENA) countries in the period 1993-2006. We evaluate bank efficiency in Egypt, Jordan, Morocco and Tunisia by means of Data Envelopment Analysis (DEA) and we employ a meta-frontier approach to calculate efficiency scores in a cross country setting. We then employ a second-stage Tobit regression to investigate the impact of institutional, financial and bank specific variables on bank efficiency. Overall, the analysis shows that, despite similarities in the process of financial reforms undertaken in the four MENA countries, the observed efficiency levels of banks varies substantially across markets, with Morocco and Tunisia outperforming Egypt and Jordan. Differences in technology seem to be crucial in explaining efficiency differences. To improve banking sector efficiency, policies should be aimed at giving banks incentives to improve their capitalisation and liquidity. Improvements in the legal system and in the regulatory and supervisory bodies would also help to reduce inefficiency. Finally, increased investments and upgrading of the stock markets in the region would help banks improve their performance.

Efficiency, Meta-frontier, Deregulation, MENA countries

Abstract:
In 1991, the Central Bank of Egypt increased the minimum capital requirements for the banking industry vis-à-vis risk-weighted assets to 8 percent, along the lines proposed by the Basel Committee on Banking Supervision. In this paper, we investigate the effects of capital regulations on cost of intermediation and profitability. Higher capital adequacy increases the interest of shareholders in managing banks' portfolios. The result is a higher cost of intermediation and profitability. A number of factors have increased the cost of intermediation in the post-capital regulation period: higher capital-to assets ratios, an increase in management efficiency, an improvement of liquidity and a reduction in inflation. The reduction in output growth countered these effects. A number of factors contributed positively to banks' profitability in the post-regulation period: higher capital requirements, the reduction in implicit cost, and the increase in management efficiency. The reduction in economic activity had opposite effects on banks' profitability. Overall, the results support the Central Bank's efforts to enforce capital regulations to improve the performance of the banking sector in Egypt.

Cost of intermediation, profitability, capital regulation, dynamic panel data

Abstract:
In order to investigate the impact of financial market liberalization on economic growth in the MENA region, we need to replace our contribution in the economic growth literature. Our project is related to the literature on policy impacting growth rather than the debate on "convergence" between low-income and high-income countries which dominates the current research on economic growth. Our study is the first to focus on MENA countries and to address several issues about the impact of financial market liberalization on economic growth. The results indicate that stock market liberalization has no effect on economic and investment growth whereas the impact on stock market and banking sector development is negative in the short run but positive in the long run. In addition, it seems that the long-run positive effect of stock market liberalization on equity market growth can be enhanced by a larger stock market, by a government that intervenes less, and by not fully opening the economy to foreign trade before liberalizing the stock market. Our results are robust to several specifications.

Stock market Liberalization, Economic and Investment Growth, Financial and Banking Sector Development, Dynamic Panel Data, MENA Countries