The Effects of the Family Ownership Structure on the Relationship between Board of Directors and Earnings Quality: Evidence Manufacturing Firms in Amman Stock Exchange.
Abstract
Purpose – The study aims to investigate the effects of the family ownership structure on the Board of Directors interpreting earnings quality of industrial companies listed on the Amman Stock Exchange (ASE).
Design/methodology/approach – Data were collected from the annual reports of industrial companies listed on ASE, and the discretionary accruals (DA) modified Jones model (1991) by Dechow et al. (1995) for measuring earnings quality. While the board of directors used the board size, board independence, board gender and CEO duality to measure corporate governance. A sample of (38) firms had been selected, and data covering the period 2010-2019 had been collected from these companies, where (380) observations were used in the analysis.
Findings – The study found that the Board sizes, Board Independency and Board gender have a significant effect on the earnings quality, but CEO duality has no significant on the earnings quality including the family ownership as moderator variable, which approves that corporate governance has a significant effect in interpreting earnings quality.
Practical implications – Implications this study provides insights on the enhancement of board effectiveness on the earnings quality in the industrial firms listed on the ASE. In addition, this study provides better picture of the significant role of family ownership on enhancing the role of corporate governance (board of directors’ characteristics), which grab the attention of policy maker in Jordan (Amman stock exchange) to consider different mechanisms to confirm the effectiveness of corporate governance.
Originality/value - This study is one of early attempt to measure the role board of directors’ characteristics on earnings quality and determining the interactive effect of family ownership for the industrial listed companies in Jordan. In addition, this study also covers longer period up to 2018.
