Do Corporate Governance and Gender Diversity Matter in Firm Performance (ROE)? Empirical Evidence from Jordan

Abstract

The aim of this paper was to examine the effect of managerial/board gender diversity and corporate governance structure on firm performance in a Jordanian business environment—a developing economy that has a distinct environment from that of developed economies. The current study focuses on the unique context of an emerging economy (i.e., Jordan). Data were collected from nonfinancial companies listed on the Amman Stock Exchange from 2018 to 2020. Data analysis was carried out using the random-effects estimator, which was considered as the most suitable for this study. The results disclose that female representation on the board of executives of Jordanian companies had a positive but insignificant effect on corporate performance, as measured by the return on equity, indicating that this variable has no effect on the performance of firms in Jordan. Both family ownership and board size had negative significant effects on performance, but for the moderating effect, corporate governance structure had no effect on the relationship among CEO duality, institution ownership, government ownership, independent directors, and firm performance. The current study only focused on Jordanian industrial firms listed on ASE, thus rendering the findings nongeneralizable to other sectors and nations. Further investigations are urged to broaden the context of the study to achieve more enriched findings. Managers can use the findings to achieve a deeper understanding of the way governance structure affects firm performance. Additionally, regulators at the Jordan Securities Commission can attain valuable insight about the adequacy of the current regulations regarding the role of gender diversity and corporate governance structure in Jordan. The current study contributes to the literature concerning the effect of managerial gender diversity and corporate governance structure on performance. Furthermore, this investigation aims to fill the current research gap in the context of Jordan, which is an emerging economy in the Arab region that is under-represented in this field of research.

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

“…Studies that report of a positive association between gender diversity and firm performance explain it in terms of women having greater analytical skills and their ability to coordinate activities with much greater ease than men while upholding company values and strategy (Heskett, 2015;Ali et al, 2021;Meah et al, 2021;Simeonescu et al, 2021;Nyeadi et al, 2021;Awan and Raza, 2022). Those that report of negative or insignificant relationship between gender diversity and firm performance mostly adduce it to the "reduced powers of female directors on corporate boards", for example, by not making them serve on any advisory or monitoring committees (Zalata et al, 2019b), which often culminates in a weaker monitoring and advisory role (Alshirah et al, 2022;Post and Byron, 2014;Vuong, 2021;Simeonescu, 2021). Besides, studies thta report of nonlinear or threshold effects (Gharbi and Othmani, 2022) often support the critical mass theory, which posits that a sufficient number of women on boards are required so that they can have real influence on board decisions and consequently affect corporate outcomes favourably (Torchia et al, 2011;Gharbi and Othmani, 2022).…”

Does diversity in supervisory boards affect profitability and corporate social responsibility?

“…Consequently, Ntim (2015) demonstrated that greater commitment to increasing the number of women serving on boards is rewarded with higher market valuation, as proved by Tobin's Q. However, Kagzi and Guha (2018) and Alshirah et al (2022) found that female board members have no special relationship with profitability. Alshirah et al (2022) suggested that skill and qualification should weigh more heavily than diversity when appointing women to boards.…”

“…However, Kagzi and Guha (2018) and Alshirah et al. (2022) found that female board members have no special relationship with profitability. Alshirah et al.…”

Globalizing the Boardroom among Family-Controlled Companies on Bursa Malaysia: The effects of corporate governance on firm performance

“…ROE was also considered to be one of the measures to determine the effectiveness of the management of a firm using its firm's assets to make a profit. Several studies have used ROE to measure the firms' performance (Alodat et al, 2021;Alshirah et al, 2022;Bawazir et al, 2021). Some of the previous research found mixed results when analyzing the CG mechanisms with firm performance.…”

“…Some of the previous research found mixed results when analyzing the CG mechanisms with firm performance. Alshirah et al (2022) concluded that ROE had a positive insignificant relationship with women directors; a negative significant relationship with board size.…”