Assessment Of Corporate Governance Practices In Jordan: An Empirical Investigation

Abstract

Corporate Governance (CG) nowadays is on the agenda of most developed and developing countries, including Jordan, and is receiving considerable attention in the business world as well as in the area of academic research, which is an indication of its importance for business development and society as a whole. The knowledge base about CG in developing countries appears to be limited, but it is growing in size and importance. This study therefore aims to investigate current CG practices and barriers to the development of good CG practices in firms. In order to accomplish the research objectives, a mixed research methodology was adopted. The findings of the study contribute to knowledge by providing empirical data to test and extend the theory of CG. The results suggest that most big and old firms are applying best practice of good CG. Regarding factors inhibiting the practice of effective CG, the results indicate that weakness of the legal environment for firms and lack of knowledge of BODs about CG principles are the most important factors. The empirical results find that constitution, compliance and conscience will affect firm’s performance positively. Separation between the position of CEO and Chairman, the existence of independent NEDs, the use of board subcommittees and a strong disclosure regime also help firms to improve performance. On the basis of the empirical results, the study recommends that the government needs to reform the relevant legislation. These suggestions may strengthen the internal governance of firms, thereby increasing performance and maximise shareholders’ wealth.