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Board Features and Capital Structure in Emerging Markets

Tariq Tawfeeq Yousif Alabdullah 1, Adala Laadjal 2, Essia Ries Ahmed 3, and Yousif Ali Abed Al-Asadi 4
1. University of Basrah, Accounting Department, Basrah, Iraq
2. University of Mostaganem, Department of Management Science Mostaganem, Algeria
3. Universiti Sains Malaysia, Graduate School of Business, Pinang, Malaysia
4. University of Basrah, Economic Department, Basrah, Iraq
Abstract—The objective of this research is to investigate, in emerging markets Jordanian non-financial firms, the effect of two main measurements/indicators of board feature on a firm’s growth/capital structure. The two main measurements are: the non-executive directors; and the board of directors’ size. In addition, for this research the analysis was by using a cross-sectional study. The hypotheses were made by statistical analysis from collection data sample of 100 firms that was made available by non-financial sector in Jordan. Statistical Software programs were used by the current research; SPSS and EViews to analyze the data. Multiple regressions were utilized to test the hypotheses of the effect of the number non-executive directors appointed to a board of directors and the board size on the growth/ capital structure of firms taking in the consideration industry type as a control variable. The data of the present research used the annual reports to obtain th1e data that issued by ASE for the year 2014. To measure the dependent variable of the current research; growth/capital structure, the present research chose financial leverage. The results showed that increasing the number of non-executive directors in the board, in another meaning increasing size of the board, has a negative and significant effect on financial leverage. Therefore, greater financial leverage is a result of the existence of small board. Yet, a testing of independent boards (non-executive directors) showed that non-executive directors have insignificant effect on capital structure. Moreover, the type of industry, as a control variable, has no impact on capital structure of the non financial firms. The present research practically presents evidence to different interested parties in emerging markets, such as scholars, policy makers and academics especially in Jordan context. The current study contributes to the literature in the middle East because it is the first study in Jordan to investigate board composition in non-financial sector (industrial and service firms) particularly from the perspective of capital structure and Manuscript received January 31, 2018; revised April 30, 2018 independent boards (non-executive directors). In that, using data from undeveloped country that has an inefficient financial market, this study provides an important view insight on the international debate on the effects of board composition on corporate decisions.

Index Terms—Board composition, capital structure/ growth, non financial companies, jordan

Cite: Tariq Tawfeeq Yousif Alabdullah, Adala Laadjal, Essia Ries Ahmed, and Yousif Ali Abed Al-Asadi, "Board Features and Capital Structure in Emerging Markets" Journal of Advanced Management Science, Vol. 6, No. 2, pp. 74-80, June 2018. doi: 10.18178/joams.6.2.74-80
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