Good corporate governance Mechanism and Firms' operating and financial performance: insight from the perspective of Jordanian industrial companies

Abstract

Evidence from research conducted analyzed, to establish the association of the factor pertaining to specific corporate practices and structures to firm operating and financial performance indicates an impressing result. The study was based on 39 industrial companies listed in Amman Stock Exchange of Jordan, over the period of 1992 to 2004. The study employed two factors of management performance, i.e., operating performance measured by Net Sales to Operating Cost and financial performance measured by Divided Payout Ratio as a model specification in order to test the hypotheses. The full regression statistical result shows that most of the selected variables, i.e., proportion of non-executive directors (BOD), general manager acting dual role as chairman of board of directors (GMCH), GEAR, FIRMSIZE were found, significantly influence the firm operating and financial performance albeit Gearing ratio (GEAR) in the case of financial performance and family members on board (FMOB) with no significant result on firm performance. Finally, the increased strength of proper corporate governance in a firm exert a positive influence on operating performance resulting a better financial performance which ultimately geared up the firm performance.