Bank Competition and Risk Appetite : Evidence from Tunisia

In this paper, we investigate whether bank competition increases risk taking for the case of the Tunisian banks. Our data set covers nine Tunisian banks observed during the period from1980 to 2009 and we conducted an econometric model based on panel data estimations. The econometric results reveal the presence of a positive relationship between competition and bank risk taking. This shows that the functions of Tunisian banks remain based on the basic traditional activities and banks need to diversify their activities in safe functions to keep the banking sector stable and avoid bank failure