The impact of corporate governance on Moroccan firm performance

Abstract

This research project investigates the impact of corporate governance on Moroccan firm performance using a quantitative approach. The model that has been developed tests the impact of corporate governance mechanisms – namely, share ownership typology, leadership characteristics, and board of directors and board of management composition – on the performance of dispersed- and concentrated-ownership Moroccan listed firms. The results contend that these mechanisms do impact performance and that the extent of this impact depends on the nature of ownership, the industry, the governance mechanisms themselves and the firm’s performance measures. The results show that all share ownership typologies are positively associated with enhanced firm performance within dispersed-ownership financial and concentrated-ownership non-financial family firms. However, there is less protection for minority shareholders in dispersed-ownership non-financial and concentrated-ownership financial family firms. This study contends that the separation of CEO and chair roles and the presence of CEO-owners enhances firm performance. In addition, a long CEO tenure is found to be negatively associated to the performance of all Moroccan firms. The results show that larger board size and gender diversity in the boardroom enhance the performance of non-financial concentrated-ownership Moroccan family firms, whereas the presence of owners on the board decreases the performance of non-financial concentrated-ownership Moroccan family firms. A larger board of management/top management team and the presence of females on this team enhances the performance of, respectively, non-financial dispersed-ownership and concentrated-ownership family firms, and dispersed-ownership Moroccan family firms. The presence of independent board members enhances the performance of dispersed-ownership non-financial firms. The presence of foreigners on the boards of financial firms is negative for dispersed-ownership and concentrated-ownership family firms. This study proves the importance of considering the interdependences among a number of governance mechanisms. The model allows all shareowners of Moroccan listed firms to focus on the most effective corporate governance mechanisms depending on their share ownership typology and operating industry. This study is the first of its kind in a Moroccan context.