The Impact of Corporate Governance on Financial Performance: A Comparative Study among Palestinian and Jordanian Banks

Abstract

Corporate governance has gotten a lot of attention recently. In most of the world's countries, the companies are intending to increase the efficiency of their work and management, and hence their profits and success rates. This research aims at examining corporate governance's impact on financial performance. It also makes a comparison in the context of Jordan and Palestine. This study also focuses on the board of directors' characteristics in terms of board size, independence, meetings, qualifications, and gender diversity methods of internal governance. To assess the firm's performance, four indicators were employed: Return on Assets (ROA), Return on Equity (ROE), Earnings per Share (EPS), and Operating Cash Flow (OCF). The researchers' views varied to classify the role of the board on financial performance, which represents a key element in corporate governance. This study is applied to the Jordanian banks on the Amman Stock Exchange in addition to the Palestinian banks on the Palestine Stock Exchange in the period 2012 to 2019. The SPSS software is used to perform the statistical analysis and check the research hypotheses using descriptive statistics, multicollinearity tests, and OLS regression. The results of the study show variations in board characteristics impact firm performance in the context of Jordan and Palestine. However, there are consistent results. As the regression found, the size of the board and gender diversity have a significant and negative impact on firm performance in the context of both Jordan and Palestine. The regression also found that board independence has a significant and positive impact on firm performance in the context of both Jordan and Palestine. The results of the study also show that there are differences in the governance structures applied in Jordan and Palestine. The findings show how the organization of the board affects the company's performance, which is considered useful information for policymakers.