Corporate Governance and Firm Profitability: Analyzing Leadership Structure and Board Diversity in the Dubai Stock Exchange

Aamir Siddique, Amjad Ali and Marc Audi

MPRA Paper from University Library of Munich, Germany

Abstract: Corporate governance has become an important measure of the company’s performance, risk management, and strategic decisions. This study investigates the relationship between selected corporate governance mechanisms and firm financial performance, focusing on the segregation of the Chairman and Chief Executive Officer roles and gender diversity on corporate boards. Drawing on theoretical frameworks such as agency theory and resource-based theory, the research examines whether these governance attributes influence firm profitability, a common indicator of financial outcome. The analysis employs a quantitative research design using secondary data from 20 firms from Dubai Stock Exchange and applies ordinary least squares regression to assess the impact of the independent variables on profitability. Governance variables are operationalized as binary indicators, with profit measured in millions of US dollars. The findings reveal that both segregation of leadership roles and gender diversity exhibit a positive association with profitability, although neither relationship is statistically significant. The study contributes to the ongoing debate regarding the effectiveness of board structures in enhancing financial outcomes in Dubai Stock Exchange. It underscores the need for more nuanced and multidimensional approaches to measuring governance quality, especially in cross-sectional research. Future studies are encouraged to adopt longitudinal data, incorporate broader governance indicators, and control for external variables to capture the complexity of governance-performance dynamics. Ultimately, while the presence of role segregation and board diversity may signal improved governance, this research cautions against simplistic assumptions about their direct influence on profitability without considering broader organizational and contextual factors.

Keywords: Corporate Governance; Role Segregation; Gender Diversity; Profitability; Firm Performance (search for similar items in EconPapers)
JEL-codes: M0 M1 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-inv
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