The Effect of Board Independence, Board Size, and Ceo Duality on Jordanian Firm Performance

Authors

  • Ahmad Rajab Jwailes Faculty of Business and Management, Universiyi Sultan Zainal Abidin Kuala Terengganu, Malaysia

DOI:

https://doi.org/10.53555/nnbma.v7i8.1027

Keywords:

Board Independence, Board Size, CEO Duality, Tobin's Q

Abstract

Board of director characteristics plays a major role in the firms’ performance. From those characteristics, board independence, the board size, and CEO duality were found to be effective in many studies. Therefore, this particular study is an examination of the relationships between three antecedents; board independence, the board size, and CEO duality; and the firms’ performance among the Jordanian listed firms. This study is composing a predictive model of Tobin’s Q based on three BoD antecedents as the independent variables. The regression model has the board independence, board size, and CEO duality as predictors of Tobin’s Q. This article is based on quantitative methods that used regression-based analysis for secondary panel data in the context of the Amman Stock Exchange (ASE). The time span is 10 years from 2008 to 2018 and 180 firms from the non-financial sector are included. The results revealed that the three relationships in the proposed model were found to be significant with board size having the highest negative impact, followed by CEO duality the board independence and both have a positive impact. The study can explain 62.64% of Tobin’s Q variance based on three corporate governance variables that are based on the board of directors' structure. In the future, adding more corporate governance variables such as ownership structure, board meetings, and audit committees will contribute to the proposed conceptual framework.

References

Aduda, J., Chogii, R., & Magutu, P. O. (2013). An Empirical Test Of Competing Corporate Governance Theories On The Performance Of Firms Listed At The Nairobi Securities Exchange. European Scientific Journal, 9(13), 117-139.

Ahmadi, A., Nakaa, N., & Bouri, A. (2018). Chief Executive Officer attributes, board structures, gender diversity and firm performance among French CAC 40 listed firms. Research in International Business and Finance, 44, 218–226.

Al Ramahi, N., Alaboud, E., Owais, W., AlRefae, K., & Shahwan, Y. (2014). The Results of Applying the Principles of Corporate Governance in Corporations Listed on the First Market in the Amman Stock Exchange. Research Journal of Finance and Accounting, 5(14), 41-53.

Al Sawalqa, F. A. (2021). Board mechanisms and corporate market value: Panel data evidence from jordan. Accounting, 7(2), 257–268. https://doi.org/10.5267/j.ac.2020.12.005

Al-ahdal, W. M., Alsamhi, M. H., Tabash, M. I., & Farhan, N. H. S. (2020). The impact of corporate governance on financial performance of Indian and GCC listed firms: An empirical investigation. Research in International Business and Finance, 51, 101083.

Al-Kassar, T. A., & Al-Nidawiy, M. A. (2014). The Role Of Corporate Governance And Its Impact On The Share Price Of Industrial Corporations Listed On The Amman Stock Exchange. European Journal of Accounting Auditing and Finance Research, 2(6), 106-123.

Almasarwah, A. K. (2015). Earnings Management And Its Relationship With Corporate Governance Mechanisms In Jordanian Industrial Firms. (PhD Thesis), Loughborough University.

Alnajar, A. E. A. (2021). THE ROLE OF GOOD CORPORATE GOVERNANCE IN PREVENTING AND REDUCING FRAUD: DENMARK AND MALAYSIA CASE STUDY. Review of Business, Accounting, & Finance, 1(1), 58–92.

Alshirah, M. H., Abdul Rahman, A., & Mustapa, I. R. (2020). Board of directors’ characteristics and corporate risk disclosure: the moderating role of family ownership. EuroMed Journal of Business, 15(2), 219–252. https://doi.org/10.1108/EMJB-09-2019-0115

Amran, A., Ishak, M. S., Zulkafli, A. H., & Nejati, M. (2010). Board structure and extent of corporate governance statement. International Journal of Managerial and Financial Accounting, 2(4), 383-400.

Arora, A. (2015). Literature Review Assessing the Relationship between Corporate Governance and Firm Performance. Paper presented at the Compendium of Research Papers of National Conference on Managing tomorrow: Issues and Challenges by DY Patil Institute of Management Studies, Pune.

Arora, A., & Sharma, C. (2016). Corporate Governance And Firm Performance In Developing Countries: Evidence From India. Corporate Governance, 16(2), 420-436.

Arslan, M., & Alqatan, A. (2020). Role of institutions in shaping corporate governance system: evidence from emerging economy. Heliyon, 6(3), e03520.

Assenga, M. P., Aly, D., & Hussainey, K. (2018). The impact of board characteristics on the financial performance of Tanzanian firms. Corporate Governance: The International Journal of Business in Society.

Bathula, H. (2008). Board Characteristics And Firm Performance: Evidence From New Zealand. (PhD thesis), Auckland University of Technology.

Chandren, S., Qaderi, S. A., & Ghaleb, B. A. A. (2021). The influence of the chairman and CEO effectiveness on operating performance: Evidence from Malaysia. Cogent Business & Management, 8(1), 1935189.

Chu, L., Mathieu, R., & Mbagwu, C. (2019). Independent Directors, Business Risk, and the Informativeness of Accounting Earnings for Debt Contracting. Canadian Journal of Administrative Sciences/Revue Canadienne Des Sciences de l’Administration, 36(4), 559–575.

Dhamadasa, P., Gamage, P., & Herath, S. K. (2014). Corporate Governance, Board Characteristics and Firm Performance: Evidence from Sri Lanka. South Asian Journal of Management, 21(1), 7-31.

Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. Journal of law and Economics, 26(2), 327-349.

Fulgence, S. (2021). THE EFFECTS OF BOARD AND OWNERSHIP STRUCTURE ON CORPORATE GOVERNANCE DISCLOSURE: EVIDENCE FROM EAST AFRICAN COUNTRIES.

Gujarati, D. N. (2009). Basic Econometrics (5th ed.). New York: McGraw-Hill.

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2009). Multivariate Data Analysis (7th ed.). New Jersey: Person Prentic Hall.

Haniffa, R., & Hudaib, M. (2006). Corporate Governance Structure and Performance of Malaysian Listed Companies. Journal of Business Finance & Accounting, 33(7-8), 1034-1062.

Idris, M. I. I. (2012). The Impact Of Ownership Structure And External Audit On Accruals And Real Activities Earnings Management In Jordan. (PhD ), University of Gloucestershire.

Khorma, T. (2014). The Myth of the Jordanian Monarchy's Resilience to the Arab Spring: Lack of Genuine Political Reform Undermines Social Base of Monarchy. Retrieved 16 Dec 2016, from https://www.swp- berlin.org/fileadmin/contents/products/comments/2014C33_kor.pdf

Kyere, M., & Ausloos, M. (2021). Corporate governance and firms financial performance in the United Kingdom. International Journal of Finance & Economics, 26(2), 1871–1885.

Liu, H., & Fong, M. W. (2010). Board Characteristics Of Medium And Large Chinese Companies. Corporate Governance: The international journal of business in society, 10(2), 163-175.

Lutfi, Iramani, R., & MellyzaSilvy. (2014). The role of board of commissioners and transparency in improving bank operational effeciency and profitability. Paper presented at the The 3rd International Conference on Business and Banking Pattaya, Thailand.

Makhlouf, M. H., Laili, N. H., Ramli, N. A., & Basah, M. Y. (2017). Board of directors’ effectiveness and firm performance: Evidence from Jordan. Research Journal of Finance and Accounting, 8(18), 23–34.

Marashdeh, Z. M. S. (2014). The Effect of Corporate Governance on Firm Performance in Jordan. (Ph.D thesis), University of Central Lancashire.

Matar, M., & Nauimat, Z. (2014). The Response of The Boards of Directors In the Distressed Jordanian Public Shareholding Companies to The Risk And Repercussions of The Global Financial Crisis. Jordan Journal of Business Administration, 10(1).

Mubeen, R., Han, D., Abbas, J., & Hussain, I. (2020). The effects of market competition, capital structure, and CEO duality on firm performance: A mediation analysis by incorporating the GMM model technique. Sustainability, 12(8), 3480.

Naciti, V. (2019). Corporate governance and board of directors: The effect of a board composition on firm sustainability performance. Journal of Cleaner Production, 237, 117727.

Naseem, M. A., Xiaoming, S., Riaz, S., & Rehman, R. U. (2017). Board attributes and financial performance: the evidence from an emerging economy. The Journal of Developing Areas, 51(3), 281–297.

Puni, A., & Anlesinya, A. (2020). Corporate governance mechanisms and firm performance in a developing country. International Journal of Law and Management.

S, A. O., Olusola, A. G., & Abiodun, O. F. (2013). Relationship Between Corporate Governance And Organizational Performance: Nigerian Listed Organizations Experience. International Journal of Business and Management Invention, 2(9), 1-6.

Srivastava, G., & Kathuria, V. (2020). Impact of corporate governance norms on the performance of Indian utilities. Energy Policy, 140, 111414.

Uribe-Bohorquez, M.-V., Martínez-Ferrero, J., & García-Sánchez, I.-M. (2018). Board independence and firm performance: The moderating effect of institutional context. Journal of Business Research, 88, 28–43.

Yermark, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40, 185-221.

Warrad, L., Almahamid, S. M., Slihat, N., & Alnimer, M. (2013). The relationship between ownership concentration and company performance,a case of Jordanian non-financial listed companies. Institute of Interdisciplinary Business Research.

Downloads

Published

31-08-2021

How to Cite

Jwailes, A. R. . (2021). The Effect of Board Independence, Board Size, and Ceo Duality on Jordanian Firm Performance. Journal of Advance Research in Business, Management and Accounting (ISSN: 2456-3544), 7(8), 1-8. https://doi.org/10.53555/nnbma.v7i8.1027