Abstract
The purpose of this study to examine the relationship between the internal corporate governance mechanism related to the board of directors’ characteristics namely (board independence and frequency of board meetings) and firm performance in Jordanian listed firms. The study used Cross-sectional data for the year 2013, with a sample of 64 industrial firms listed in the Amman Stock Exchange. Firm performance was measured by return on assets (ROA) as an accounting-based performance measure. The current study utilized multiple linear regression analysis to test the hypotheses and examine the relationship between the board of directors’ characteristics namely (board independence and frequency of board meetings) and firm performance. The findings showed that board independence is significantly and positively related to ROA. The current study found an insignificant relationship between the frequency of board meetings and firm performance measured by ROA. These results indicate that the monitoring role of the more independent board could have a significant influence on firm performance. Contradictory to expectation, the result of this study reveals that the frequency of board meetings do not determine the performance of industrial Jordanian firms. Further, Current study findings provide the idea to future researchers for further empirically explore the importance of the board of director's characteristics in Jordan. This study provides several important implications for the theory, regulatory authorities and policy makers and academia and researchers.
Highlights
In the current global business environment, business organizations increase their continued struggle to achieve a high record of growth to attract investors who will be willing to finance the future investment projects of their firms
When the non-executive or outside directors are independent from the management, there could be the possibility of providing superior benefits to the firm financial performance
The population for this study is the industrial firms listed at Amman Stock Exchange (ASE) Jordan, which are divided into 10 sub-sectors and comprised of 64 firms
Summary
In the current global business environment, business organizations increase their continued struggle to achieve a high record of growth to attract investors who will be willing to finance the future investment projects of their firms. In today’s competitive business environment stability and profitability are key factors influencing the decision to invest in firms [1]. This justifies the inability of deteriorating businesses to raise funds for their investment projects. This situation can affect the specific business organisations and the overall economic performance. This study purposes to look at the effect of BOD independence and board meeting frequency on the performance of listed firms in Amman Stock Exchange. There are many ways to measure corporate governance, this study will consider only: (i) board of director’s independence; and (ii) board meeting frequency.
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