The Impact of CEO Characteristics on Investment Efficiency in Jordan: The Moderating Role of Political Connections

Loona Shaheen (), Zakarya Alatyat, Qasem Aldabbas, Ruba Nimer Abu Shihab and Murad Abuaddous
Additional contact information
Loona Shaheen: Accounting Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan
Zakarya Alatyat: Business Administration Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan
Qasem Aldabbas: Accounting Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan
Ruba Nimer Abu Shihab: Department of Economy, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan
Murad Abuaddous: Accounting Department, Faculty of Business, Al-Balqa Applied University, Alsalt 19117, Jordan

JRFM, 2024, vol. 17, issue 12, 1-15

Abstract: This study investigates the impact of CEO characteristics—specifically CEO age, founder status, and family membership—on investment efficiency in Jordanian non-financial companies, with a focus on the moderating role of political connections. Drawing on the existing literature, we identify conflicting views regarding how these characteristics influence investment decisions. Some studies suggest that younger CEOs may adopt more aggressive investment strategies, while older CEOs tend to be conservative, leading to balanced resource allocation. Similarly, CEOs with founder status and family membership are thought to have an emotional attachment to the company, theoretically resulting in cautious investment behavior. However, empirical evidence remains mixed. By using data from 62 non-financial firms listed on the Amman Stock Exchange (ASE) from 2019 to 2023, this study employs regression analysis to explore these relationships. The findings reveal that CEO age contributes to investment efficiency by mitigating both over- and under-investment. Contrary to expectations, CEO founder status shows no significant effect on investment efficiency. Additionally, family-member CEOs exhibit a tendency toward under-investment, driven by a desire to preserve family wealth. Political connections further complicate these dynamics, encouraging riskier investment strategies while diluting the positive effects of CEO characteristics. These results provide new insights into the intricate interplay between CEO traits and political networks, contributing to the discourse on corporate governance in emerging markets. The study concludes with practical implications for policymakers and company boards, emphasizing the need for balanced leadership selection strategies to optimize investment efficiency.

Keywords: CEO characteristics; investment efficiency; founder status; family ownership; political connections; Jordanian companies (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/17/12/540/pdf (application/pdf)
https://www.mdpi.com/1911-8074/17/12/540/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:17:y:2024:i:12:p:540-:d:1532952

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().