The effect of board multiple directorships and CEO characteristics on firm performance: evidence from Palestine

Abstract

PurposeThe purpose of this study is to empirically examine the effect of board multiple directorships and chief executive officer (CEO) characteristics on firm performance among nonfinancial firms listed on the Palestine Security Exchange (PSE) during the period from 2009 to 2016.Design/methodology/approachBased on 200 observations, this study utilizes panel data to examine the effect of the predictors on firm performance measured by return on assets. The analysis is repeated using the return on equity and two regression methods to evaluate the robustness of the main analysis (pooled regression, and backward stepwise regression analysis).FindingsThe results show that the “busyness” of a CEO reduces their effectiveness and is associated with losses in the companies where they are in charge. On the other hand, the results show that CEO tenure, CEO experience and CEO political connections have a positive effect on corporate performance.Originality/valueThis study is timely given that the practice of multiple directorships is widely common among firms in developing countries. Prior research in Palestine has not investigated the role of multiple directorships and the CEO characteristics on corporate outcomes. This study provides a picture of the potential benefits to firms, policymakers and professional bodies from considering CEO variables. The findings of such an examination can help them to set up suitable policies and enhance the role and the quality of the CEO in firms.

The influence of the chairman and CEO effectiveness on operating performance: Evidence from Malaysia

“…Generally, a change in the leadership structure from CEO duality to non-duality improves (Yasser et al, 2015): duality means that the Chairman is also the CEO of the firm, and non-duality that the posts are held by different individuals (Lam & Lee, 2008). In addition, previous studies claim that the separation of these positions, and an older CEO with long tenure, are positive attributes enhancing operating performance (Dogan et al, 2013;Peni, 2014;Saleh et al, 2020). Consistently, the negative association between CEO duality and firm performance supports the agency theory assumption (Dogan et al, 2013).…”

“…According to Antia et al (2010), greater agency cost, lower company value and higher levels of knowledge risk are correlated with a shorter CEO horizon. The longer the term of the CEO, the higher is the performance of the firm, because long-serving CEOs can become specialists in all facets of the firm's activities and technicalities (Saleh et al, 2020). Thus, from the findings of the previous studies, CEO effectiveness (non-duality, age, and tenure) influences operating performance.…”

“…The firm age has negative significant relationship with firm performance (Khan et al, 2019). Financial leverage has a significant and negative relationship with firm performance (Chandren et al, 2020;Saleh et al, 2020). The audit firm has no significant influence on firm performance (Harymawan et al, 2019).…”

“…To the best of our knowledge, no previous studies have considered the relationship between CEO effectiveness under the Chairman and firm performance, another motivation for conducting this study, and in the Malaysian context. Furthermore, the CEO's non-duality, age and tenure structure (Dogan et al, 2013;Peni, 2014;Saleh et al, 2020) may assist the Chairman in achieving the desired operating performance, empowering the CEO to encourage tolerance of risk, resilience, and determination to cooperate with the Chairman. Typically, in determining the board membership, the CEO's power should be considered for the shareholders' benefit (Combs et al, 2007).…”

The Role of Information Technology (IT) in the Economic Development of Palestine

“…Correlation analysis was conducted to identify the relationship between the key factors related to Information Technology, and their relationship with the economic development of manufacturing's firms. The results have been presented [17]. When the IT Valence (ITV) was investigated for its relationship with other variables, it was found that ITV had moderate relationship with RE (0.671) and ED(0.623), but weak relationship with ME (0.564) and ITC (0.487).…”