The Relationship between Corporate Governance Mechanisms and Firm Performance: Evidence from Jordanian’s Listed Firms

Abstract

The purpose of this study is to examine the relationship between corporate governance mechanisms and firm performance (measured in the form of return on assets (ROA), and return on equity (ROE) in the Jordanian context. Research is quantitative in nature, based on panel data of 58 firms listed in Amman Stock Exchange (ASE) for 8 years from 2012 to 2019, with 464 observations, and the panel corrected standard error (PCSE) regression has been used to assess the relationship among variables. The study found that board size, board independence and presence of female in board had no effect of firm performance whether ROA and ROE. Likewise, the study found no relationship between foreign ownership and ROE. In contrary, CEO duality, concentration ownership, foreign ownership had a positive effect on ROA. As well as, CEO duality and concentration ownership had a positive effect on ROE. However, the current study found that institutional ownership had a negative effect on firm performance whether ROA and ROE. The finding adds to the body of knowledge by demonstrating new and original evidence that some current corporate governance mechanisms are ineffective in reducing the agency problem in a developing country.