Impact of Corporate Governance on Financial Institutions’ Performance: A Board Composition Case

Abstract

The impact and implementation of Corporate Governance (CG) has been a matter of interest for various firms, as it substantially affects the financial stability of institutions. This study analyses the impact of Corporate Governance (CG) elements that include board composition on the financial performances of the financial institutions listed on Jordan"s Amman Stock Exchange (ASE). The study population involved 40 Jordanian financial institutions belonging to both commercial banks and financial companies listed on the Amman Stock exchange (ASE). Spearman correlation was used to identify the relationship between corporate governance and financial performance of institutions. It showed an insignificant correlation between board composition in general and companies" financial performance. In the relationship between each board composition factor to each financial performance measure, the study found positive, negative, and mixed correlation results. While analyzing the institution"s performance, any prospective researcher should consider other CG factors so that the study could better represent the CG impact on institutions" performance in developing countries such as Jordan. Contribution/ Originality: This study contributes to the existing literature on the impact of corporate governance on firm performance. Although previous studies have assessed this research area, most studies are centered on the developed countries and large economies, with little to no focus on developing and small economies like Jordan.

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