The Relationship Between Muslim Directors on Board of Directors and Audit Committee Characteristics on Performance Evidence from Jordan

Abstract

This study examines the impact of corporate governance mechanisms on the performance of firms in Jordan. Giving particular attention to diversity in the board of directors and audit committee, this study looks into the impact of Muslim directors on the board of directors (BoD) and audit committee (AC) on performance. Overall, 76-panel data were used, which were obtained from published annual reports of industrial and service sectors from the Amman Stock Exchange from 2012 to 2018. A fixed-effect model was used to test various hypotheses of the study. Both accounting-based (ROA and ROE) and market-based (Tobin's Q) performance measures were tested. which, as yet, only a handful of studies have been conducted. The findings showed that the relationships between Muslim directors on the board have an insignificant effect on ROA and ROE. Conversely, Muslim director in AC has a positive but insignificant relationship with ROA and ROE. Concerning the relationship with Tobin’s Q, the findings showed that Muslim directors on the board have an insignificant relationship with Tobin’s Q. Moreover, the findings showed that Muslim directors in AC have an insignificant positive relationship with Tobin’s Q. This study provides useful information that is of great value to policymakers, academics, and other stakeholders. This study fills the gap and contributes significantly to the literature by proving extensive findings with regards to the impact of corporate governance on firms ’performance especially the presence of Muslim directors in BoD and AC in Jordan.

Keywords: Muslim Directors, Board of Directors, Audit Committee, Corporate Governance; Performance; Jordan