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The Impact of CEO Characteristics on Investment Efficiency in Jordan: The Moderating Role of Political Connections

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  • Loona Shaheen

    (Accounting Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan)

  • Zakarya Alatyat

    (Business Administration Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan)

  • Qasem Aldabbas

    (Accounting Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan)

  • Ruba Nimer Abu Shihab

    (Department of Economy, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan)

  • Murad Abuaddous

    (Accounting Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan)

Abstract

This study investigates the impact of CEO characteristics—specifically CEO age, founder status, and family membership—on investment efficiency in Jordanian non-financial companies, with a focus on the moderating role of political connections. Drawing on the existing literature, we identify conflicting views regarding how these characteristics influence investment decisions. Some studies suggest that younger CEOs may adopt more aggressive investment strategies, while older CEOs tend to be conservative, leading to balanced resource allocation. Similarly, CEOs with founder status and family membership are thought to have an emotional attachment to the company, theoretically resulting in cautious investment behavior. However, empirical evidence remains mixed. By using data from 62 non-financial firms listed on the Amman Stock Exchange (ASE) from 2019 to 2023, this study employs regression analysis to explore these relationships. The findings reveal that CEO age contributes to investment efficiency by mitigating both over- and under-investment. Contrary to expectations, CEO founder status shows no significant effect on investment efficiency. Additionally, family-member CEOs exhibit a tendency toward under-investment, driven by a desire to preserve family wealth. Political connections further complicate these dynamics, encouraging riskier investment strategies while diluting the positive effects of CEO characteristics. These results provide new insights into the intricate interplay between CEO traits and political networks, contributing to the discourse on corporate governance in emerging markets. The study concludes with practical implications for policymakers and company boards, emphasizing the need for balanced leadership selection strategies to optimize investment efficiency.

Suggested Citation

  • Loona Shaheen & Zakarya Alatyat & Qasem Aldabbas & Ruba Nimer Abu Shihab & Murad Abuaddous, 2024. "The Impact of CEO Characteristics on Investment Efficiency in Jordan: The Moderating Role of Political Connections," JRFM, MDPI, vol. 17(12), pages 1-15, November.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:12:p:540-:d:1532952
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    References listed on IDEAS

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    1. Biddle, Gary C. & Hilary, Gilles & Verdi, Rodrigo S., 2009. "How does financial reporting quality relate to investment efficiency?," Journal of Accounting and Economics, Elsevier, vol. 48(2-3), pages 112-131, December.
    2. Huiqi Gan, 2019. "Does CEO managerial ability matter? Evidence from corporate investment efficiency," Review of Quantitative Finance and Accounting, Springer, vol. 52(4), pages 1085-1118, May.
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