Board characteristics and firm performance: The case of Jordanian non-financial institutions

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Abstract

The study aims to examine the impact of board characteristics on firm performance of non-financial institutions in Jordan. The study employs the random effects regression model to analyze the panel data of 77 non-financial institutions of the industrial and services sector over the period 2008–2019. Firm performance is measured by return on assets ROA. While board characteristics were explained by board size, CEO duality, CEO tenure, non-executive directors (NEDs), and a number of board meetings. Firm age and firm size were added to our model as control variables. Our results reveal that board size, CEO tenure, non-executive directors (NEDs), firm age, and firm size have a positive significant impact on firm performance, whereas the CEO duality and a number of board meetings have a negative significant impact on firm performance. This paper will contribute to the ongoing debate on the relationship between the board characteristics and firm performance. Therefore, the current study extends previous literature by providing empirical evidence about the relationship between board characteristics and a firm performance. Particularly in developing countries, there is relatively a little researched area. Jordanian firms are needed to consider the significance of the board characteristics especially, for the non-financial institutions that can help them in designing the board strategies to enhance their performance. Therefore, Jordanian data will offer new empirical evidence in an emerging market, which will provide a better understanding of the relationship between board characteristics and firm performance.

Keywords: Non-Financial Institutions, Board Characteristics, Firm Performance, Jordan, Panel Data Analysis

Authors’ individual contribution: Conceptualization — Z.M.; Methodology — Z.M. and M.W.A.; Validation — Z.M., M.W.A., M.M.A., and R.M.A.; Formal Analysis — Z.M. and M.W.A.; Investigation — M.M.A. and R.M.A.: Resources — Z.M., M.W.A., M.M.A., and R.M.A.; Writing — Original Draft — Z.M.; Writing —Review & Editing — Z.M., M.W.A., M.M.A., and R.M.A.; Visualization — Z.M., M.W.A., M.M.A., and R.M.A.; Supervision — Z.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C33, D22, G34

Received: 08.06.2021
Accepted: 09.08.2021
Published online: 12.08.2021

How to cite this paper: Marashdeh, Z., Alomari, M. W., Aleqab, M. M., & Alqatamin, R. M. (2021). Board characteristics and firm performance: The case of Jordanian non-financial institutions. Journal of Governance & Regulation, 10(3), 150–159. https://doi.org/10.22495/jgrv10i3art13