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Investigating How Corporate Governance Affects Performance of Firm in Small Emerging Markets: An Empirical Analysis for Jordanian Manufacturing Firms

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  • Jehad S. Aldehayyat
  • Sliman S. Alsoboa
  • Mohammad H. Al-Kilani

Abstract

This paper aims at exploring how the mechanisms of corporate governance (audit committee size, CEO duality, board size, female board members and board composition) affect the firm performance. Based on data from 66 out of 69 firms, which represents (95.6%) of Jordanian publicly quoted manufacturing firms covering a five-year period (2008–2012), the use of multiple regression analysis was done for assessing how each of the mechanisms of corporate governance relates to firm performance. The empirical findings of this study suggest that size of firm and Tobin's Q and ROA shows a significant positive correlation, while leverage and ROA show significant correlations. Results indicate that CEO duality and size of board have negative correlation with ROA, while non-executive directors' proportion shows a positive correlation with ROA. No relationship was recognized between the female board members' proportion and audit committee size and ROA. Conversely, the variables of corporate governance do not show a relation with measure of market performance, which supports the argument that market-based performance measures are impartial when economic circumstances are normal in context of emerging markets. The paper provides insight into better understanding how the various mechanisms of corporate governance are related to the performance of firm given the scenario of a small emerging market of non-oil-producing country.

Suggested Citation

  • Jehad S. Aldehayyat & Sliman S. Alsoboa & Mohammad H. Al-Kilani, 2017. "Investigating How Corporate Governance Affects Performance of Firm in Small Emerging Markets: An Empirical Analysis for Jordanian Manufacturing Firms," International Business Research, Canadian Center of Science and Education, vol. 10(1), pages 77-95, January.
    • Handle: RePEc:ibn:ibrjnl:v:10:y:2017:i:1:p:77-95
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    More about this item

    Keywords

    Jordan; corporate governance; firm performance; manufacturing firms; small emerging market; non-oil-producing country;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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