Origin of the Financial Crisis

**Chapter 2**

**Abstract**

The Primary Origin of the

This paper examines the relationship between the stock return volatility, outside directors, independent directors, and variable control using simultaneous-equation panel data models for a panel of 89 France-listed companies on the SBF 120 over the period of 2006–2012. Our results showed that the outside directors (FD) and audit size increase the stock return volatility. Furthermore, the results indicate that the independent directors and ROA have a negative effect on the stock return volatility; this result indicates that these variables contribute to decrease and stabilize the stock return volatility. This study employs a variety of econometric models, including feedback, to test the robustness of our empirical results. Also, we examine the relationship between the corporate governance and the stock returns volatility, exchange rate, and treasury bill using GARCH-BEKK model for a panel of

**Keywords:** stock return volatility, corporate governance, risk management,

During the peak of the global financial crisis of 2008, the major failures that have been involved in the banking crisis were particularly remuneration, as executive incentives, risk management, shareholder activism, and the problems of qualification of the board. Indeed, an excess of credit combined with poor governance in the banking industry can generate carrier failures of a systematic risk. At this point, the term governance has drawn the attention of lawyers and economics experts, political scientists, sociologists, and management scientists [1]. Also, poor banking

Bernanke [3] showed that the financial crisis of 2007/2008 has been started for

Kirkpatrick [4] suggests that the systematic crisis, due to the failure of the international financial market, was also a crisis of corporate governance and regulations. Before and during the financial crisis, corporate governance issues have been attracted attention, since it led to the collapse of many financial institutions in the OECD report. Kirkpatrick [4] showed that the "financial crisis can be to an important extent attributed to failures and weakness of corporate governance arrangements. When they were put to the test, corporate governance routines did not serve the purpose to safeguard against excessive risk-taking in some financial

many reasons (insufficient information, fraud, and incompetence).

Financial Crisis

*Aloui Mouna and Jarboui Anis*

99 French firms over the period of 2006–2013.

governance was a major cause of global crisis [2].

simultaneous-equation models, GARCH

**1. Introduction**

service companies."

**13**
