The Effect of Corporate Governance on Firm Performance in Jordan

Abstract

This paper aims to contribute to prior literature through analyzing the impact of corporate governance on the firm financial performance for a sample of 82 non-financial firms listed on Amman Stock Exchange (ASE). CEO-duality, board independence, size of the board, concentrated ownership, composition of the board (gender), composition of the board (nationality), and board meetings are articulated as the independent variables, while accounting-based proxies (ROA and ROE) and market-based measures (Tobin’s Q and Market share) are applied to measure firm performance. Fixed effect and random effects models are utilized using related data from ASE for the period 2015-2019. We find a positive correlation of board size, board composition (gender), and board independence and market valuation tools (Market share and Tobin’s Q). Similarly, a positive relationship was observed between board independence, CEO duality, and frequency of board meeting and the accounting-based measures. Concentrated ownership had a negative impact on ROA alone. Finally, board composition (nationality) and CEO duality negatively affect the market-based measures.