Abstract
This study is an attempt to achieve the main objective by examining the association between the board of director’s characteristics, audit committee characteristics and the executive committee characteristics and the performance of the Oman companies. This study used many assumptions to test the relationship between independent variables and dependent variable as discussed in the section explaining the study method. The data comprised of 162 non-financial companies because financial and non-financial companies employ different methods and they have different structures. As this study attempts to bridge the gap in the existing literature by investigating the association between corporate governance mechanisms and firm performance in the emerging market of Oman, it focuses on adding new important variables of corporate governance mechanisms like board change, the role of secretary on the board, the legal counsel and the executive committee characteristics that improve firm performance. The findings indicated a significantly positive relationship between board size, board meeting, audit committee independence and executive committee independence, and the Tobin`s Q. On the other hand, board independence and legal counsel are significantly and negatively related to Tobin`s Q. Moreover, a positive but insignificant relationship is found between CEO tenure, CEO compensation, audit committee size, and the firm performance (Tobin`s Q). Furthermore, board change, the role of the secretary on the board, audit committee meeting, executive committee size and executive committee meeting are revealed to have a negative but insignificant association with firm performance (Tobin`s Q). Finally, this study provides recommendations for future research.
Highlights
In recent years, the attention in corporate governance has grown exponentially especially with the major corporate collapses such as Commerce Bank (1991), Enron (2001), WorldCom (2002), Tyco (2002), Global Crossing (2002), Adelphia (2002), Arthur Anderson (2001), Lehman Brothers (2008), Freddy Mac (2008), Fanny Mae (2008), Goldman Sachs (2007), Marconi (2005), Northern Rock (2007), HIH (2001), Harris Scarfe (2001), One
As this study attempts to bridge the gap in the existing literature by investigating the association between corporate governance mechanisms and firm performance in the emerging market of Oman, it focuses on adding new important variables of corporate governance mechanisms like board change, the role of secretary on the board, the legal counsel and the executive committee characteristics that improve firm performance
One probable clarification for the positive significant association between board size and Tobins is that this result is supported by resource dependence theory, which postulates that the board has to be more strict when it comes to monitoring of management to ensure minimal financial fraud
Summary
The attention in corporate governance has grown exponentially especially with the major corporate collapses such as Commerce Bank (1991), Enron (2001), WorldCom (2002), Tyco (2002), Global Crossing (2002), Adelphia (2002), Arthur Anderson (2001), Lehman Brothers (2008), Freddy Mac (2008), Fanny Mae (2008), Goldman Sachs (2007), Marconi (2005), Northern Rock (2007), HIH (2001), Harris Scarfe (2001), One. In the same context of financial crisis, the capital market in the Sultanate of Oman has experienced its share of corporate troubles affecting large Omani companies such as National Rice Mills SADGI and Omani National Investment Company Holding SAOG, but other several smaller companies which had to ask for assistance from the government. Chargers have been cited over the years revealing that companies "hide information and possess ineffective internal controls and negligent, incompetent and bungling boards of directors. Mismanagement of companies and lack-lustre board of directors are to blame for the sharp drop in share prices that occurred in 1998 and the ensuing loss of investor confidence. All of which underscore the need for higher corporate governance standards (Dry, 2003)
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