Do Board Ownership and Characteristics Affect on Firm Performance?  Evidence from Egypt

Abdelmohsen M. Desoky[1] and Gehan A. Mousa2

¹Accounting Department, South Valley University, Egypt. Currently, he is the Head of Accounting Department, University of Bahrain.

² Accounting Department, Benha University, Egypt. Currently, she is working at the University of Bahrain.

*Corresponding Author’s E-mail: gamousa@hotmail.com

Accepted 11 December, 2012

Abstract

This study investigates the effect of board ownership and characteristics on firm performance (FP). It provides evidence on this effect using a sample of 96 of the most active listed Egyptian companies on the Egyptian Stock Exchange (EGX). The paper employs OLS and 2SLS regression analysis to test the association between board ownership and characteristics  and FP measured by three different measures namely return on assets - ROA, return on equity - ROE, and Tobin's Q. Board characteristics variables are statistically significant associated with FP when measured by ROA. Only one of the three 2SLS models developed in this study (ROA model) is significant. Regarding the two competing arguments related to the effect of board ownership on FP (namely the interest alignment and the entrenchment effects), the argument of alignment effect was supported. Furthermore, findings from 2SLS regression models of FP when measured by ROA support the argument that non-linear relationship may exist between some variables of board ownership and characteristics from one side and FP from the other.

Keywords: Firm Performance, Board Ownership, Outside Directors, CEO/Chair Duality, The Egyptian Exchange, The EGX 100.