Abstract
This study investigates the relationship between board of directors’ characteristics namely (board size and CEO duality) and firm performance among Jordanian listed firms. Firm performance is measured using return on assets (ROA). Due to limited studies regarding corporate governance practices and firm performance has been done in developing countries like Jordan. Importantly, these studies have also been limited in their scope due to restricted and particularized focus on factors hindering firm performance in the industrial sector of Jordan. This study covers industrial listed firms on the Amman Stock Exchange, Jordan for the year 2013 as a sample. Multiple regression analysis is used to test the hypotheses and to examine the relationship between board of directors’ characteristics namely (board size and CEO duality) and firm performance. The findings showed that board size is significantly and positively related to ROA. On the other hand, CEO duality is significantly and negatively related to ROA. These results indicate that corporate governance plays a vital role in enhancing firm performance and reducing agency conflict. Further, regulator bodies in Jordan should increase the effectiveness of corporate governance in industrial Jordanian firms in order to enhance the quality of financial reports. In addition, this study opens up avenues for more studies on firm performance not only in Jordan, but also in other countries where this area of study is lacking.
Highlights
The most Arab studies were concentrated at local and regional level regarding current corporate governance approaches accountability and only discuss governance structure of corporate system design of companies
Few researchers have conducted that addressed corporate governance approaches effect on financial reporting of firm, it was stressed that thorough studies regarding the mechanisms that affect firm financial performance should be conducted
The correlation coefficient between BOD size (Board Size) and return on asset (ROA) is 0.21. It displays a positive relationship between BOD size and ROA where ROA will increase as the BOD size increases
Summary
The most Arab studies were concentrated at local and regional level regarding current corporate governance approaches accountability and only discuss governance structure of corporate system design of companies. Few researchers have conducted that addressed corporate governance approaches effect on financial reporting of firm, it was stressed that thorough studies regarding the mechanisms that affect firm financial performance should be conducted. The World Bank (2004) and International Monetary Fund (IMF) had assessed corporate governance conditions in Jordan. They determined Jordanian firms are not properly followed the corporate governance rules and regulations. The Companies are following very initial stage of code of corporate governance in Jordan. This can be ascribed by operational performance of board of directors' and weak independency of their members [2, 3]
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