Can Conventional Governance Mechanisms Be a Matter for Financial Performance in Islamic Countries?

Conventional Governance Mechanisms

Abstract

The study investigates the effect of eight conventional governance mechanisms, namely (board size, CEO duality, audit committee (AUDC) size, AUDC independence, board structure, AUDC number of meetings, board gender, and external audit quality), on financial performance for a sample of 246 non-financial listed firms in GCC countries from 2015-2019. Several models have been run using “Hierarchical Multiple Regression” for six GCC countries. The study has revealed different results for example, board size, AUDC size and AUDC number of meetings have insignificant effect on firm performance in most GCC countries. In contrast, board gender and board structure are the most determining factors of financial performance in GCC countries. The results of the study call for legislative amendments that would urge companies to increase the number of non-executive members and empower females to effectively participate in corporate boards through the quota system. Consequently, regulators can visit Islamic corporate governance rules and practices in financial institutions to improve conventional corporate governance in non-financial firms.