Corporate governance, investor protection, and firm performance in MENA countries

Abstract

The literature on development finance and corporate finance in emerging markets is, to date, primarily focused on the impact of country-level investor protection and differences in legal systems on firm value across countries. This paper extends the literature by investigating the relationship between firm-level governance and performance while controlling for country-level governance and other relevant variables within the context of the Middle East and North Africa (MENA) region. Evidence shows a strong and significant positive relationship between good corporate governance -such as higher investor protection and lower managerial entrenchmentand firm value. We also find that the positive effects of property rights on firm performance are more pronounced for firms with higher managerial entrenchment. In addition, the positive effects of property rights on firm performance are additionally more significant for firms with higher managerial entrenchment and higher cash holding. Finally, the positive effects of property rights on firm performance are additionally more significant for firms with higher managerial entrenchment and lower dividend payout.

Board diversity, corporate governance, corporate performance, and executive pay

“…Consistent with previous studies (e.g., Carter et al, 2003Carter et al, , 2010Chamlou, 2008;Dale-Olsen et al, 2013;Hasan et al, 2014;Ntim, 2015;Salloum et al, 2017), the current study controls for possible omitted variables bias by including a number of control variables. The study controls for CG mechanisms that have been examined in previous studies: board characteristics (e.g., board size and unitary board leadership) and shareholding structure mechanisms (e.g., block, government, and institutional shareholding).…”

“…In addition, most listed companies in MENA countries have highly concentrated shareholding structures, with dominance of the state and family controls (Al-Bassam, Ntim, Opong, & Downs, 2018;Hasan et al, 2014;Jamali et al, 2007;Piesse et al, 2012). Smith (2009) documents that 75% of the region's companies are controlled by families.…”

“…Economic, financial, governance, political, and social reforms are being pursued worldwide (Bussiere & Mulder, 2000;Gupta, Baldacci, Clements, & Tiongson, 2005;Swamy & Dharani, 2018). Recent corporate scandals have directed more attention to CG and EP mechanisms (Hasan, Kobeissi, & Song, 2014;Ullah, Ahmad, Akbar, & Kodwani, 2018a), especially on the importance of board of directors in terms of their roles, effectiveness, composition, and diversity (Carter, D'Souza, Simkins, & Simpson, 2010;Carter, Simkins, & Simpson, 2003;Yamori, Harimaya, & Tomimura, 2017). It is worth noting, however, that the extent to which such contemporary economic, financial, governance, and social (e.g., education) reforms influence a number of key corporate outcomes is rarely investigated (Salloum et al, 2017).…”

“…Hence, there is scarcity of empirical studies investigating the impact of corporate board diversity on EP, and thus, this study provides a timely contribution to the extant literature. Noticeably, the Middle East remains one of the few regions, where the role of board diversity has been acutely underresearched (Hasan et al, 2014;Piesse, Strange, & Toonsi, 2012;Salloum et al, 2017). Discernibly and as will be expatiated later on, we focus on MENA countries because the economic, political, legal, cultural, and CG structures in such countries differ from those of other regions and thus implies that the generalizability of their results for the MENA region is arguably limited (Hasan et al, 2014;Jamali et al, 2007;Metcalfe, 2007;Salloum et al, 2017;Samaha, Dahawy, Hussainey, & Stapleton, 2012).…”

Impact of Corporate Governance Framework on Economic Performance in European Union

“…The amount of transaction costs is difficult to quantify, but author Okruhlica (2013) recommends using qualitative indices, in this case competitiveness indices. An analogue approach has chosen by author's team, Hasan, Kobeissi and Song (2014), applied quantitative analysis on Corporate Governance, specifically multiregional analysis. Steinhauser (2015) used as a measure the amount transaction costs and as at the same times an indicator of the institutional environment quality -the credit derivatives, namely Credit Default Swaps (CDS).…”