Board of Directors, Management Ownership, and Capital Structure and its Effect on Performance: The Case of Palestine Security Exchange

Abstract

This manuscript offers an empirical investigation of three variables that have an effect on the financial performance of the corporations listed in the Palestine Securities Exchange (PSE). The three variables are aboard of directors’ characteristics (size and composition), b- management ownership, and c- capital structure. Furthermore, this paper uses the same methodology as (Belkhir, 2009; Pesamaa, Klaesson, and Haahti, 2008; Ghosh, 2003; Dowen, 1995). It employs various statistical techniques to examine the hypotheses (descriptive analysis, and ordinary least square; simple and multiple regression). Besides, 28 Palestinian corporations were selected for applying statistical analysis within four years 2005-2008. The results of the study indicate that the Chief Executive Officer CEO-Chairman separation does not have any significant impact while the CEO-Chairman duality has a significant impact on the financial performance. Additionally, the paper finds out that the board size has a significant negative impact on the financial performance. In addition, this paper concludes a positive impact of management ownership on the financial performance. Finally, we conclude that the debt financing has no influence on the profitability of Palestinian corporations. Therefore, we recommend the Palestinian legislator to consider the findings of our paper when he decides to publish the Palestinian company act. In the end, we hope that the Palestinian legislator to take in consideration the current model of Daraghma and Alsinawi study when he issues the new Palestinian company law.