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Corporate governance and stock price performance of firms during the crisis: evidence from the MENA region

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  • Omar Farooq
  • Youssef Chetioui

Abstract

This paper examines the impact of corporate governance mechanisms on stock price performance of firms in the MENA region, i.e., Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait, and Bahrain, during the recent financial crisis. Using dividend policy, choice of auditors, and transactional complexity as proxies for corporate governance, we document better stock price performance for firms with superior governance mechanisms. Our results show that firms with one of the big-four auditors, firms paying dividends, and firms with lower transactional complexity are associated with superior stock price performance. We argue that lower agency problems that accompany firms with better corporate governance mechanisms make it hard for controlling shareholders to expropriate, thereby improving stock price performance. Our results are important in a way that they highlight the power that individual firms have in resisting adversities of financial crisis.

Suggested Citation

  • Omar Farooq & Youssef Chetioui, 2012. "Corporate governance and stock price performance of firms during the crisis: evidence from the MENA region," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 7(4), pages 331-349.
    • Handle: RePEc:ids:ijbget:v:7:y:2012:i:4:p:331-349
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    Citations

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    Cited by:

    1. Pillai, Rekha & Al-Malkawi, Husam-Aldin Nizar, 2018. "On the relationship between corporate governance and firm performance: Evidence from GCC countries," Research in International Business and Finance, Elsevier, vol. 44(C), pages 394-410.
    2. Hind Lebdaoui & Youssef Chetioui & Elias Guechi, 2021. "The Impact of Behavioral Biases on Investment Performance: Does Financial Literacy Matter?," International Journal of Economics and Financial Issues, Econjournals, vol. 11(3), pages 13-21.
    3. Mohamed Douch & Omar Farooq & Yuliya Kalinina, 2020. "Exposure to Provincial and National Information and Firm Performance: Crisis Period Evidence from China," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(1), pages 1-11, February.

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