Chapter 18: Board Structure and Financial Performance: A Survey to Directors' Perception

Corporate governance research suggests that board structure can impact organizational outcomes such as financial performance and executive remuneration. Agency theory posits that a board composed of independent directors and chaired by an independent chairperson can provide effective control over agency costs, while stewardship theory suggests that effective decision-making is facilitated when the board is chaired by the CEO and majority of directors are from the executive team. Empirical research into the association between board structure and performance in Jordan has provided mixed results, with no consensus supporting either theory. This study takes a different approach to researching the assumed association between board structure and performance by surveying directors’ perspectives on such assumed relationship between financial performance and four of boards’ characteristics (i.e., board independence, CEO duality, board size, and female ratio on board). Findings of this research indicate that Jordanian directors perceive a medium to strong association between financial performance and each of board independence, independent chair of board, and female ratio on board. However, directors of Jordanian boards perceive no association between financial performance and board size.