Corporate governance, investor protection, and firm performance in MENA countries

The literature on development finance and corporate finance in emerging markets is, to date, primarily focused on the impact of country-level investor protection and differences in legal systems on firm value across countries. This paper extends the literature by investigating the relationship betwe...

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Bibliographic Details
Published in:Middle East development journal 2014-01, Vol.6 (1), p.84-107
Main Authors: Hasan, Iftekhar, Kobeissi, Nada, Song, Liang
Format: Article
Language:English
Subjects:
Companies
Corporate governance
Development finance
Emerging markets
firm performance
Governance
Legal system
Property rights
the Middle East and North Africa region
Value
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Summary:The literature on development finance and corporate finance in emerging markets is, to date, primarily focused on the impact of country-level investor protection and differences in legal systems on firm value across countries. This paper extends the literature by investigating the relationship between firm-level governance and performance while controlling for country-level governance and other relevant variables within the context of the Middle East and North Africa (MENA) region. Evidence shows a strong and significant positive relationship between good corporate governance - such as higher investor protection and lower managerial entrenchment - and firm value. We also find that the positive effects of property rights on firm performance are more pronounced for firms with higher managerial entrenchment. In addition, the positive effects of property rights on firm performance are additionally more significant for firms with higher managerial entrenchment and higher cash holding. Finally, the positive effects of property rights on firm performance are additionally more significant for firms with higher managerial entrenchment and lower dividend payout.
ISSN:1793-8120
1793-8171
DOI:10.1080/17938120.2014.886421