The Impact of Internal Corporate Governance Mechanisms on the Unsystematic Risks at Jordanian Commercial Banks Listed on the Amman Stock Exchange

Eljaser Alelfartas

doi:10.7176/rjfa/10-18-01

Abstract

The aim of this research is to investigate the relationship between Internal corporate governance mechanisms and on the unsystematic risks using data from 13 commercial banks listed on the Amman Stock Exchange during the period 2009-2016. Panel data was utilized and the data gathered from 104 annual reports from13 commercial banks in Amman, which analyzed using descriptive statistics, correlation, and regression. Seven main corporate governance variables were analyzed in terms namely: (Board size, Board Independence, CEO /Chairman Separation, Audit Committee Independence, Ownership concentration, Institutional Ownership, and Foreign Ownership) their relative of the unsystematic risk (credit risk, liquidity risk, and operational risk). furthermore, bank size and debt Ratio were used as a control variable. Based on the results of the study, it has been observed that Internal corporate governance mechanisms variables have a significant effect on the unsystematic risk. Keywords: Corporate Governance, Unsystematic Risk, Panel Data. DOI : 10.7176/RJFA/10-18-01 Publication date :September 30 th 2019

Highlights

Last decade, some successful banks collapsed suddenly after a good performance
There is an effect with a clear statistic significant between the impact of Internal Corporate Governance Mechanisms and Credit Risk
As illustrated in table has above table reports that R Square, the coefficient of determination equal to (0.388), which means that about (38.8%) of the variation in credit risks is explained by the model

Summary

Introduction

Some successful banks collapsed suddenly after a good performance. For example, in the UK, Northern Rock was one of the FATS 100s, but in February 2008 it was nationalized by the government. Corporate Governance has received considerable attention, especially following the massive costly corporate scandals that have focused on the possibility that many problems with the reason to structural factors. Collapses such as those that occurred at Maxwell Communications Corporation (MCC), Enron, Parmalat and others, suggested that the failure, or inability, of boards of directors to control and monitor business, laxity in accounting standards and an ethos of contented indifference on the part of many business leaders, had played important roles. Among the significant recommendations are the board of directors responsible for the risk that faces the company in the business environment for international environments(Aksoy & Dayi, 2017)

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