Board Characteristics and Corporate Performance : Evidence From Palestine

This paper investigates the relationship between board characteristics and corporate performance of firms in Palestine. The degree to which the board would be effective in performing its duties and tasks depends on several factors manifested by certain characteristics. Particularly, this research examines the impact of CEO duality, board size, board independence, board gender diversity, board academic background, and frequency of board meetings on the level of corporate performance. The sample encompasses all firms listed in the Palestine Stock Exchange (PSE) for the years 2012 to 2014 and have the required data totaled 141 firm-year observation. The data was manually collected from the audited annual reports downloaded from PSE website. Generalized least square estimators are obtained for the multiple linear relationship between board characteristics and firm performance. The results indicate that corporate performance of Palestinian listed firms is positively related to board duality, board gender diversity, and number of board meetings. Meanwhile, board size, board independence and board academic background seem to negatively affect performance. These results are more consistent with the stewardship theory where the board plays a supportive role by empowering executives and, in turn, increase the potential for higher performance. In this context decisions are executed faster, the ambiguity between the processes and the objectives of the firm is reduced and performance is enhanced. Our results have an implication to policy makers. For any future governance code, the stewardship theory not the agency theory should guide the lawmakers or legislators