Managing earnings using classification shifting: Novel evidence from Jordan

open access journalIn response to McVay calls for more research to provide additional cross-sectional tests of classification shifting, the current paper examines whether Jordanian public companies engage in earnings management through classification shifting. Using a sample consisting of 112 public firms from Jordan during the 2010-2014 period, this study applies McVay (2006) Model to investigate the relationship between the non-recurring items (NREC) and the variation in unexpected core earnings (UCE). This analysis was supplemented with employing Fan et al., (2010) Model as a robustness check. Our empirical results reveal that managers in Jordan misclassify their recurring expenses to inflate their core earnings. More precisely, we find that non-recurring items (NREC) are significantly and positively associated with the variation in unexpected core earnings (UCE); thus, classification shifting is a common practice among Jordanian firms. Additionally, we find out stronger evidence on classification shifting when our sample was restricted to those firms with a more significant opportunity to misclassify recurring items (firms with positive NREC). This study contributes to the body of accounting literature by providing the first empirical evidence in the Middle East region overall on the use of classification shifting by Jordanian firms. We are also the first to apply McVay (2006) and Fan et al., (2010) models in the Middle East region. Our findings have important policy implications for standard setters, regulators, auditors and investors in their attempts to constrain earnings management practices and improve the financial reporting quality in Jordan

Corporate Governance and Corporate Performance: Evidence from Jordanian Family and Non-Family Firms

Corporate governance and corporate performance are two concepts that have been extensively examined in finance and management literature. However, most studies have been conducted in developed countries, particularly the UK and the US, while there is relatively little work carried out on the Middle East, specifically Jordan. Many Jordanian companies are characterised by concentrated ownership (generally family firms), which forms a considerable part of its economy (ROSC Jordan, 2004). Few researchers have examined family firms’ performance from a corporate governance perspective. This study investigates the influence of corporate governance on the performance of Jordanian family and non-family firms from 2009 to 2015, employing agency theory and resource-dependency theory to investigate the relationship between corporate governance and performance of family and non-family firms. Agency theory is concerned with problem of agency between principals and agents as well as principals and principals, which undermines value maximisation. Due to complexity within the corporate governance and performance phenomena, agency theory is supplemented with predictions from resource dependence theory, since this theory asserts that the resources provided by the shareholders and the directors are likely to improve performance. It has been suggested that the board of directors and ownership structure are effective corporate governance mechanisms to improve firm performance. Multivariate pooled-OLS regression analyses were the main tool of analysis. Secondary data obtained from published firm annual reports, firm financial reports and the Thomson One database was analysed to test the effect that board of directors and ownership structure have on corporate performance and the performance of family firms. To ensure confidence in these estimates, this thesis uses two-stage least squares (2SLS) to address the issues of endogeneity. The focus of the investigation was firms listed on the Amman Stock Exchange (ASE). The dataset is a panel of all firms on the ASE from 2009 to 2015, excluding financial firms with a sample of 103 firms, including 56 family-firms (about 55%) and 47 non-family firms. Major findings include (i) board mechanisms; board size, independent directors and family CEO negatively influence family firm performance while CEO duality tends to have a positive effect on performance, (ii) female board member, ownership concentration and local institutional investors have no effect on corporate performance, (iii) in non-family firms, there are positive relationships between governance mechanisms (independent directors and local institutional investors) and corporate performance. However, board size and concentrated ownership have no effect on performance, (iv) female board member has a negative effect, and (v) the proportion of foreign shareholders has a positive effect on the performance of family and non-family firms. Overall, there is a difference between the impact of corporate governance mechanisms on family and non-family firms’ performance. In terms of practical implications, this study illustrates (i) The importance of corporate governance in the broader sense, especially in emerging economies such as Jordan, where ownership is concentrated in Jordanian companies; (ii) signs policymakers and regulatory bodies can use to monitor companies that are more likely to confiscate investors and/or introduce governance problems; (iii) a potentially productive method for professional investors to select companies with superior governance structures and performance to improve returns on their investments, particularly in the long term

The relationship between corporate governance and financial performance: Evidence from Jordanian family and nonfamily firms

The main objective of this article is to attempt to fill a research gap in the relationship between corporate governance mechanisms and financial performance of family and nonfamily firms’ by using a sample of non-financial firms listed on Amman Stock Exchange for a period 2009 to 2015. Although, the concerns of corporate governance and firm’s ownership structure have recently attracted serious attention from scholars, policymakers, and academic institutions, a large number of empirical works found no clear link between corporate performance and corporate governance. In addition, the research into how the corporate governance has an influence on family firms, especially in emerging countries is still unclear. In particular, Jordan as an emerging market has not been the focus of previous studies, particularly with regard to corporate governance in family firms.9pubpub

Female directors, family ownership and firm performance in Jordan

Seaman, Claire - ORCID 0000-0003-4818-5051 https://orcid.org/0000-0003-4818-5051This study examines the impact of female directors on the financial performance of family and non-family Jordanian firms. A sample of 103 Jordanian public firms listed on Amman Stock Exchange for the time period 2009-2015 was selected. The study had a quantitative approach and used a panel data methodology. The data analysis was conducted using Ordinary Least Square Regression. ROA and Tobin’s Q were deployed as measurement of financial performance. The appointment of female directors does not have any significant impact on the financial performance of family firms. However, with regard to non-family firms, female directors appeared to have a negative impact on the performance of these firms. The impact of female directors on family firm performance merits further research in the context of different countries and cultures. Appointments based on qualifications and expertise is more likely to have a positive impact. Jordan is an under-researched area where the impact of female directors on the firm performance would merit further research. Differentiating between the impact of female directors on family and non-family firms would also merit further research, especially in the context of the conditions under which they are appointed.The authors are grateful to the Middle East University, Amman, Jordan for the financial support granted to cover the publication fee of this research article.https://doi.org/10.5430/ijfr.v11n1p20611pubpub

Family-owned banks in Jordan: Do they perform better?

Claire Seaman - ORCID: 0000-0003-4818-5051 https://orcid.org/0000-0003-4818-5051Purpose: Family ownership is very common for Jordanian businesses, leading to a high level of involvement of family members in company management. There continues to be intense discussion on the pros and cons of family ownership, particularly as it focuses corporate control within a small family group. The purpose of this paper is to examine the performance of family and non-family owned banks appear on the Amman Stock Exchange over the 2016 to 2020 period.Design/methodology/approach: The research on Jordanian domestic banks is based on data from the annual reports of banks listed on their websites which offers comprehensive data on finances, ownership and the board. Family owned and non-family banks were analysed using multiple regression technique to identify any variations in their performance.Findings: Using a sample of 16 domestic banks with 75 bank-year observations over the 2016 to 2020 period. The study supports other research in finding that family ownership is negatively related to bank performance. This is true for accounting-based and market-based performance measures, including ROA, ROE and Tobin’s Q test results. Additionally, analysis identifies greater negative consequences for performance within family-owned banks by board of directors.Originality/value: This paper extends previous research on family businesses by investigating the impact of family ownership on the financial performance in the Jordanian bank sector. This research determined that devaluation is a consequence of higher levels of ownership concentration for domestic banks in Jordan.https://doi.org/10.1108/JFBM-11-2021-0140aheadofprintaheadofprin

Does capital structure matter? Evidence from family-owned firms in Jordan

Claire Seaman - ORCID: 0000-0003-4818-5051 https://orcid.org/0000-0003-4818-5051Item is not available in this repository.Purpose This study examines the potential impact of capital structure on the financial performance of family-owned firms in Jordan. Design/methodology/approach Using panel data of 107 listed companies from 2019 to 2021, the authors use a multivariate regression model to empirically examine the role that family firms' capital structure can play in engendering financial performance in the short and long terms. Findings This study's evidence indicates that family businesses rely on equity as their primary source of funding. This approach has been proven to be detrimental to their financial performance, as evidenced by the negative impact of capital structure on family firms' financial performance in the current study. Originality/value Capital structure-related decisions are essential to a firm's performance. Thus, there have been numerous empirical studies examining the relationship between capital structure and corporate performance in various settings worldwide. However, the findings of these studies are inconclusive. Also, there are relatively few empirical studies investigating the association between capital structure and the performance of family firms in emerging countries, particularly Jordan. This study, therefore, addresses this empirical gap in extant literature.https://doi.org/10.1108/JFBM-09-2022-0115aheadofprintaheadofprin

Do Multiple Directorships Stimulate or Inhibit Firm Value? Evidence from an Emerging Economy

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.Purpose: This study examines the potential influence of multiple directorships on the firm value of listed firms in Jordan. Design/methodology/approach: Using a sample of 1067 firm-year observations of Jordanian listed companies from 2010 to 2020, this study applies a pooled ordinary least squares (OLS) regression model to examine the above-stated relationship. This technique was supported by conducting a Generalized Method of Moments (GMM) estimation to address the possible occurrence of endogeneity concerns. Findings: Our results show a significant negative relationship between multiple directorships and firm performance, supporting, thereby, the “Busyness Hypothesis”, which suggests that directors with multiple directorships are expected to be over-committed, too busy, and less vigilant. Thus, their ability to effectively monitor the company management on behalf of the shareholders is quite limited. Originality/value: To the best of our knowledge, this is the first study in Jordan, and one of the very rare in the Middle Eastern and North African (MENA) region, to examine the relationship between multiple directorships and firm performance. This study provides important policy and practitioner implications in the field of corporate governance by highlighting the necessity of imposing stricter limits on the number of directorships allowed for board directors. Crucially, our empirical evidence implies that limited directorships ensure that directors are able to fulfil their board responsibilities appropriately, which is significantly associated with the firm value