Investigating the impact of various Corporate Governance Mechanisms on the Accounting Performance of NonFinancial Firms Listed on the Amman Stock Exchange

Rammadan, Ammar Z. (2020) Investigating the impact of various Corporate Governance Mechanisms on the Accounting Performance of NonFinancial Firms Listed on the Amman Stock Exchange. Doctoral thesis, University of Wales Trinity Saint David.

[img]
Preview
Text
Rammadan, Ammar.pdf

Download (2MB) | Preview

Abstract

There is a long history of corporate scandals and failure in accounting performance around the globe as a result of weak government mechanisms overseeing companies due to the absence of clear government laws and legislation governing the relationship between shareholders (owners, investors) and executive managers (internal management) in a firm. Weak government mechanisms reinforce the greed of the dominant and influential groups within the various companies. This weakens the accounting and financial performance of a firm and leads to it being unable to generate sufficient profits to satisfy its shareholders, as well as being unable to attract new investors or encourage them to invest within the firm. As a result, various researchers are investigating the impact of corporate governance (CG) mechanisms on firm performance. The majority of the research regarding corporate governance and its impact on firm performance has been conducted in developed countries, especially in the US and UK. Relatively less evidence is available in the Middle East, particularly in Jordan. Thus, the aim of the current study is to investigate the impact of various corporate governance mechanisms on firm performance for Jordanian non-financial companies listed on the Amman Stock Exchange during the period 2012 – 2018. Different hypotheses have been generated through agency theory to explore the relationship between the corporate governance mechanisms and the accounting performance of Jordanian nonfinancial companies. Agency theory is employed because it explains the agency problems between the corporate manages and shareholders, which have a negative impact on the value maximisation objective. It has been claimed that various features of the board of directors’ act as effective corporate governance mechanisms for solving the agency problem between corporate managers and shareholders. This study uses multiple regression panel data analysis to analyse the data. A fixed effect model is used to investigate the impact of corporate governance mechanisms on firm performance. Secondary data is collected xi for 95 Jordanian non-financial companies listed on the Amman Stock Exchange. The data is collected from three different sources: the Amman Stock Exchange website, the annual reports of the selected companies and from the DataStream database. A mixed set of results is observed from the empirical investigation. The findings of the study reveal a significant negative impact of board size on firm performance, which indicates that large board size tends to be inefficient due to poor coordination and communication. The findings of the study also reveal that non-executive directors (NEDs) have a significant negative impact on firm performance. The findings are not in line with the hypothesis generated from agency theory, which states that NEDs play a vital role on the board by monitoring the firm’s performance and providing valuable suggestions to the executive directors, as they are experts in their field and have years of experience. However, CEO duality has a significant positive impact on firm performance, which reveals that Jordanian firms perform better if the roles of CEO and Chairman are performed by one individual. These findings are also inconsistent with the Jordanian CG code, which emphasises the separate of the role CEO and Chairman for implementing the strict check and improve the balance of the board of directors. The findings indicate that three board committees (audit, remuneration and nomination) have a significant positive impact on the firm performance. These findings are consistent with the empirical results and Jordanian CG code because establishment of board committees tends to streamline various business operations, which has a positive impact on firm performance. A corporate governance (CG) index has been generated based on the Jordanian corporate governance code requirements. Compliance with the corporate governance index has been checked for the Jordanian nonfinancial firms. The findings indicate that the corporate governance index also has a positive and significant impact on firm performance. xii The findings of the current study will help the Jordanian regulators to amend the current Jordanian corporate governance code because the impact of different CG mechanisms on the firm performance has been checked through real data and statistical tests. Further, the findings can assist the Jordanian corporate boards and managers to improve their companies’ corporate governance system by implementing the significant CG mechanisms that are explored by this study.

Item Type: Thesis (Doctoral)
Uncontrolled Keywords: corporate governance mechanisms accounting performance non-financial firms Amman stock exchange
Subjects: H Social Sciences > HG Finance
Divisions: Theses and Dissertations > Doctoral Theses
Depositing User: Sandra Stedman
Date Deposited: 01 Dec 2020 11:29
Last Modified: 11 Dec 2020 14:01
URI: https://repository.uwtsd.ac.uk/id/eprint/1526

Actions (login required)

View Item View Item