Do Board Characteristics and Corporate Social Responsibility Practices Affects Profitability and Firm Value in the Egyptian Listed Companies?

Abstract

Good corporate governance mechanism implementation will consistently strengthen the firm's competitive position, maximizing the firm value, and managing its resources and risks more efficiently, which consequently will lead to strengthen the trust of the firm's stakeholders. Hence, they can operate and grow sustainablyThe main aim of this research is to investigate the relationship between corporate governance mechanisms mainly board characteristics (namely: CEO duality, board size and board independence) on firm value using profitability as an intermediate variable in the Egyptian listed non-financial companies. Using a research sample of 45 firms during the period 2015-2020, we run six multiple regression models to test the impact of CEO duality, board independence, board size, gross profit margin, ROA, ROE and Tobin's Q and firm size as a control variables on firm value. Consistent the results reported by many previous researchers, we found that CEOD, Tobin's Q and firm size have a positive significant impact on company's profitability, while board independence has a significant negative relationship with company's profitability. Moreover, Findings shows that corporate social responsibility, Tobin's Q and firm size have a positive significant impact on company's profitability. In addition, the statistical results show that corporate social responsibility, board characteristics as required by corporate governance practices, Tobin's Q and firm size have a positive significant impact on firm value.The statistical results support the literature and previous scholars indicated for the association between corporate governance mechanism and CSR based on the firm financial performance as a moderator in different causal directions. If governance entities assumed that social responsible decisions enhance the firm's financial performance. In other words, there is a positive relationship between firm financial performance and CSR hence, effective governance mechanisms may promote CSR. This research shows that there is a positive association between CSR and firm value when taking into consideration both stakeholder theory and reputation theory. The statistical results indicate that effective corporate governance mechanisms improve nonfinancial or the social outcomes, namely CSR as the effective monitoring by shareholders and independent boards has a positive impact on CSR.