1 Department of Business and Management, The Faculty of Social Sciences, Aalborg University, VBN2 The Faculty of Social Sciences, Aalborg University, VBN3 Al Akhawayn University in Ifrane, Ifrane
Evidence from the MENA region
This paper examines the impact of corporate governance mechanisms on stock price performance of firms in the MENA region, i.e. Morocco, Egypt, Saudi Arabia, United Arab Emirates, Jordan, Kuwait, and Bahrain, during the recent financial crisis. Using dividend policy, choice of auditors, and transactional complexity as proxies for corporate governance, we document better stock price performance for firms with superior governance mechanisms. Our results show that firms with one of the big-four auditors, firms paying dividends, and firms with lower transactional complexity are associated with superior stock price performance. We argue that lower agency problems that accompany firms with better corporate governance mechanisms make it hard for controlling shareholders to expropriate, thereby improving stock price performance. Our results are important in a way that they highlight the power that individual firms have in resisting adversities of financial crisis.
International Journal of Business Governance and Ethics, 2012, Vol 7, Issue 4, p. 331-349