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Corporate governance, economic turbulence and financial performance of UAE listed firms

Author

Listed:
  • Mostafa Kamal Hassan
  • Sawsan Saadi Halbouni

Abstract

Purpose - The purpose of this paper is to investigate the effect of corporate governance mechanisms on the financial performance of the United Arab Emirates (UAE) listed firms. Design/methodology/approach - Relying on a sample of 95 UAE listed firms affiliated to financial and non‐financial sectors, the paper performs a cross‐section regression analysis to test whether there is a significant relationship between governance mechanisms (voluntary disclosure, CEO duality, board size, board committee and audit type) and UAE firms' performance while controlling for firm size, industry type, firm listing years and leverage. The paper relies on data published on year 2008 and utilizes the accounting‐based measures of Return on Assets (ROA), Return on Equity (ROE) as well as the market measure (Tobin's Q) in order to measure the UAE firms' financial performance. Findings - The empirical results show that voluntary disclosure, CEO duality and board size are significantly influencing the UAE accounting‐based performance measure, while none of the governance variables significantly affects firms' market performance measure. The results also reveal that firm size is the only control variable that significantly influences firms' performance. This paper provides evidence showing that the accounting‐based performance measures are more objective in the years where unstable economic conditions exist. Practical implications - The paper's findings indicate that the underlying principles of corporate governance are applicable in emerging markets. The findings are important to regulators, investors, managers, and researchers aiming at developing new policies that establish better regulatory infrastructure that increases investors' confidence and attracting foreign investment. Originality/value - The paper is one of very few studies that examine the relationship between corporate governance and firms' financial performance under economic turbulent in an emerging market economy, the UAE.

Suggested Citation

  • Mostafa Kamal Hassan & Sawsan Saadi Halbouni, 2013. "Corporate governance, economic turbulence and financial performance of UAE listed firms," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 30(2), pages 118-138, May.
    • Handle: RePEc:eme:sefpps:v:30:y:2013:i:2:p:118-138
    DOI: 10.1108/10867371311325435
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    Citations

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    Cited by:

    1. Sin-Yu Ho & Bernard Njindan Iyke, 2017. "Determinants of stock market development: a review of the literature," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 34(1), pages 143-164, March.
    2. Kogilavani Apadore & Siti Subaryani Binti Zainol, 2014. "Determinants of Corporate Governance and Corporate Performance among Consumer Product Industry in Malaysia: A Theoretical Model," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 159-165, April.
    3. Jehad S. Aldehayyat & Sliman S. Alsoboa & Mohammad H. Al-Kilani, 2017. "Investigating How Corporate Governance Affects Performance of Firm in Small Emerging Markets: An Empirical Analysis for Jordanian Manufacturing Firms," International Business Research, Canadian Center of Science and Education, vol. 10(1), pages 77-95, January.
    4. Jianhua Mi & Hong Sheng & Cassandra Elrod, 2016. "Financing, reputation and information disclosure quality in the Chinese market," Applied Economics, Taylor & Francis Journals, vol. 48(9), pages 789-798, February.

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