The mediating role of operating performance on the association between BOD features and firm financial performance. An Applied Study on the Egyptian Stock Market

Abstract

Purpose: This paper examines the influence of operating performance as a mediator variable on the relationships between the various characteristics of the Board of directors and firms' financial performance, as measured by return on average total assets and the ratio of Earning per ordinary share, for nonfinancial firms listed on the Egyptian stock market. Methodology: A multiple regression analysis and path analysis are performed to explain the four models employed for a sample of (26) non-financial Egyptian firms from 2018 to 2021. Five principal hypotheses are examined, HO1: there is no statistically significant influence at the level of significance (a ≤ 0.05) for the Board of Directors’ characteristics on EPS. HO2: there is no statistically significant influence at the level of significance (a ≤ 0.05) for the Board of Directors’ characteristics on ROA. HO3: there is no statistically significant influence at the level of significance (a ≤ 0.05) for the characteristics of the Board of Directors on ATO. HO4: there is no statistically significant influence at the level of significance (a ≤ 0.05) for the characteristics of the Board of Directors on OPM. H05: operational performance has no significant impact on the relationship between the Board of Directors’ characteristics and firm financial performance measured by ROA and EPS. Findings: Consistent with the majority of prior research, this study's findings indicate that Board of director characteristics have a positive, significant influence on firm financial performance during the study period. Additionally, BOD characteristics affect operating performance in a positive direction, particularly asset turnover. In addition, a path analysis reveals that operating performance acts as a positive mediator in this relationship.