THE RELATIONSHIP BETWEEN CORPORATE GOVERNANCE AND THE PERFORMANCE OF PALESTINIAN FIRMS: AN EMPIRICAL STUDY

Naser Abdelkarim and Said Alawneh

The International Journal of Business and Finance Research, 2009, vol. 3, issue 2, 105-120

Abstract: This paper investigates the relationship between performance and corporate governance in Palestine. Firm performance is measured by Tobin’s Q, whereas corporate governance is determined based on the level of ownership concentration. Prior research in developed economies provides evidence that ownership concentration has a significant impact on firm performance, while evidence in emerging economies is inconclusive. However, in Palestine there is no prior empirical research on this relationship. This paper reports the results of an empirical study of a sample of firms listed at Palestine Securities Exchange during the period (2003-2006). The sample of the study consists of (16) firms, which represent around 50% of all listed firms. The paper reports a series of regressions that account for different specifications of firm valuation and ownership concentration. The results indicate that ownership concentration has a good explanatory power of market value change as measured by Tobin's q for years 2003 and 2006 but not for years 2004 and 2005. This paper provides some evidence, although not decisive, that ownership concentration is negatively related to firm value. This evidence invites further research in this area before deciding on the need for ownership de- concentration in Palestinian firms.

Keywords: Corporate Governance; Ownership Concentration; Financial Performance; Tobin's Q; Market Value and Book Value (search for similar items in EconPapers)
JEL-codes: G30 G34 L25 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (4)

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