The Impact of Governance on the Financial Performance of Companies Listed in Amman and Palestine Stock Exchanges for the Period 2013-2019

Abstract

This research aimed to examine the impact of governance on the financial performance of companies listed in Amman and Palestine stock exchanges, by measuring the governance with several indicators: the gender diversity of board members, the size of the board of directors, duality in the position of the CEO, independence and academic qualifications of board members. As for the financial performance, it is measured using return on assets and return on equity. A sample of (52) industrial companies and (21) banks distributed between the two stock exchanges was studied in the period (2013-2019). The study concluded that there is an insignificant positive effect of gender diversity, a significant adverse effect of the size of the board of directors, the duality in position of the CEO’s job, the independence of the board of directors and an important positive impact of the practical experience of board members on the return on assets. Gender of members in the board, independence and members’ academic qualifications of the board of directors have a significant positive effect, with the presence of an insignificant adverse effect of the size of the board of directors and a significant adverse effect of the duality position of the CEO on the return on equity. Based on the results, the study recommends continuous review of the codes and directing companies to pay attention to corporate-governance practices through laws and legislations to push companies towards the commitment to corporate-governance practices. Also, the continuous review for board members and their experience, commitment and independence should be carried out. It is also recommended that stock exchanges shed light on corporate governance and its importance through holding seminars and workshops attended by managers and decision-makers in companies.