Social institutions, corporate governance and firm-performance in the MENA region

Abstract

The purpose of this paper is to examine the impact of social institutions, firm-specific corporate governance and ownership characteristics on firm performance in the MENA countries. The analysis uses a unique set of financial and governance data from 225 companies listed on the stock exchanges of eleven countries in MENA region for the period 2007–2017. Regression models are used to test the research hypotheses. The results show that the relationship between corporate governance and firm performance depends on the measurement used for firm performance. Some firm-specific governance characteristics, such as board size and insider and institutional ownership, are robust predictors of firm performance in various models of analysis. Investors should be aware of the impact of firm–specific corporate governance and ownership characteristics on firm performance. Furthermore, the differences of economic and non-economic social factors among countries will likely affect the firm performance. Moreover, regularity authorities in the MENA countries should consider the unique features of religion and other social heterogeneity conditions when introducing control mechanisms. The paper adds to the literature on corporate governance by providing interesting new findings, which document that the relationship between corporate governance and firm performance in the MENA region countries differs in accordance with the performance measure used. Most importantly, these new findings document a significant role for social and governance institutions, whose mitigating impact however varies in accordance with the performance measure used.