Academic journal article Asian Social Science

The Moderating Effect of Board Diversity on the Relationship between Executive Committee Characteristics and Firm Performance in Oman: Empirical Study

Academic journal article Asian Social Science

The Moderating Effect of Board Diversity on the Relationship between Executive Committee Characteristics and Firm Performance in Oman: Empirical Study

Article excerpt

Abstract

This study focuses to achieve an important objective by examining the moderating effect of board diversity (foreign member on the executive committee and executive committee commitment) on the relationship between executive committee characteristics and firm performance in Omani companies excluding those categorized under the financial sector. The sampling covers two years, 2011 and 2012. This study used multiple regression and hierarchical multiple regression to analyze the association between independent, moderating and dependent variables. Based on the findings, a positive association between executive committee independence, executive committee meeting and firm performance is revealed although it is not significant. In the same context, the finding revealed a negative relationship between executive committee size and firm performance but not significant. Moreover, the board diversity moderated the relationship between executive committee characteristics and firm performance but the effect is not significant. Finally, this study offers recommendations for future researchers at the end.

Keywords: corporate governance, executive committee characteristics, board diversity performance and Oman

(ProQuest: ... denotes formulae omitted.)

1. Introduction

In the present time, the companies' performance is the first priority for investors in terms of evaluation throughout the globe, as the world has become a single business marketplace. Globalization has facilitated business activities and superior performance reduced the barriers that exist in corporate trade and financial investment, in a sense that businesses have now a greater opportunity to grow. Additionally, with extensive technology generation, individuals interested in performing their job tasks anywhere can look for a company that displays high performance. Therefore, company performance is the most crucial ingredient to attract people. People are who are responsible for managing firms should thus enhance firm performance by developing new plans and procedures for operations and transactions updates during the business lifecycle. With regards to significance of firm performance, the present study considers the impact of performance on the business environment in relation to some measurement like accounting-based measurement and market-based measurement as detailed in the following paragraphs.

Businesses throughout the globe require development and growth if they are to receive investments. Before investing in a particular business, investors usually make sure that the business is secured and stable financially and it has the ability to produce long-term profits (Khan, Nemati, & Iftikhar, 2011; Mallin, 2007). Thus, investors are not attracted to companies that display negative performance and this failure to attract investment leads to negative outcome for businesses and eventually, the nation's economy.

In past years, corporate governance has increased in importance, particularly following the collapse of major corporations including Commerce Bank (1991), Arthur Anderson (2001), HIH (2001), Harris Scarfe (2001), One.Tel (2001), WorldCom (2002), Tyco (2002), Global Crossing (2002), Adelphia (2002), Lehman Brothers (2008), Freddy Mac (2008), Fanny Mae (2008), Goldman Sachs (2007), Marconi (2005), Northern Rock (2007), Parmalat and Yukos in the U.S., Europe and other continents (Jackling & Johl, 2009; Obiyo & Lenee, 2011; Ii, Kankpang, & Okonkwo, 2012).

Similarly, in the context of the Sultanate of Oman, the country has also suffered corporate troubles that influenced large Omani companies including National Rice Mills (SADGI) and Omani National Investment Company Holding (SAOG) along with several small companies that had to request government assistance. In fact, charges have been made over the years indicating that companies keep their adverse information under wraps with regards to their ineffective internal controls and to negligent, incompetent and largely ignorant boards of directors. …

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