The Effect of Board Independence and Board Meeting on Firm Performance: Evidence from Jordan

Abstract

The purpose of this study to examine the relationship between the internal corporate governance mechanism related to the board of directors’ characteristics namely (board independence and frequency of board meetings) and firm performance in Jordanian listed firms. The study used Cross-sectional data for the year 2013, with a sample of 64 industrial firms listed in the Amman Stock Exchange. Firm performance was measured by return on assets (ROA) as an accounting-based performance measure. The current study utilized multiple linear regression analysis to test the hypotheses and examine the relationship between the board of directors’ characteristics namely (board independence and frequency of board meetings) and firm performance. The findings showed that board independence is significantly and positively related to ROA. The current study found an insignificant relationship between the frequency of board meetings and firm performance measured by ROA. These results indicate that the monitoring role of the more independent board could have a significant influence on firm performance. Contradictory to expectation, the result of this study reveals that the frequency of board meetings do not determine the performance of industrial Jordanian firms. Further, Current study findings provide the idea to future researchers for further empirically explore the importance of the board of director's characteristics in Jordan. This study provides several important implications for the theory, regulatory authorities and policy makers and academia and researchers.

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