Corporate Governance Mechanisms and Firm’s Performance: Evidence from Jordan

Abstract

The purpose of this study is to investigate the effect of corporate governance mechanisms on the firm’s performance. Corporate governance practices were divided into two groups; board structure and ownership structure. The sample of the study consists of 60 companies from industrial and service sectors that are listed on Amman stock exchange (ASE). Data was gathered manually through the annual financial reports for the period from 2012-2017 results in 366 year-observation. Stata statistical software was used to test the study hypotheses. The results revealed that board meetings frequency and government ownership positively and significantly impact the firm’s performance, these results suggest that board meetings frequency is considered an indicator of the board effectiveness that enhances decision making quality and thus the firm performance, the results suggest that government ownership is providing a helping hand that improves the firm’s performance. The findings also showed that board independence negatively and significantly impact the firm’s performance, this result suggests that independent board members do not guarantee to improve the performance of a firm, and it stays the firm’s responsibility to choose independent board members who are able to exercise effective oversight function for the purpose of enhancing the performance of a firm. This study contributes to the literature by providing empirical evidence from developing countries about the impact of corporate governance measures and practices on firms’ performance.