The Influence Of Corporate Governance Practices On Bank Profitability In Listed Banks Of Jordan

Abstract

This study investigates the influence of corporate governance variables Board Size, Board Independence, CEO Duality and prudential regulation (Capital Adequacy Ratio) on the financial performance of banks listed on the Amman Stock Exchange (ASE), using Return on Assets (ROA) as the performance metric. As corporate governance becomes increasingly critical in emerging financial markets, especially within regulated sectors like banking, this paper addresses the research gap concerning the Jordanian context. A census-based quantitative approach was applied to a sample of 20 banks using secondary data from annual reports, Central Bank filings, and ASE disclosures. Analytical techniques included Pearson correlation and multiple linear regression. The results reveal that Board Size has a statistically significant positive impact on ROA, indicating that larger boards may enhance strategic decision-making and oversight. Board Independence showed a positive but modest effect, suggesting that independence alone may not be sufficient to improve performance without active engagement and financial expertise. CEO Duality demonstrated a negative association with ROA, supporting agency theory arguments; The result was marginally insignificant. The Capital Adequacy Ratio exhibited a small but significant positive influence on ROA, highlighting its importance for financial stability. These findings contribute to the growing body of literature on governance-performance linkages in emerging markets and provide practical implications for regulators and policymakers in Jordan. The study underscores the importance of optimized board structures and regulatory compliance in enhancing bank profitability. Future research should explore longitudinal data and incorporate additional governance variables such as board diversity and audit effectiveness.