“Does board structure matter firm’s value? The Jordanian evidence”

This study aims to examine the impact of board structure on firms’ value in Jordan. Panel regression estimates were used to analyze the data collected from forty-four non-financial firms that listed on the Amman Stock Exchange for the period 2010–2021. Random effects model was applied using a dependent variable (Tobin’s Q), four independent variables (board size, independent directors, female directors


INTRODUCTION
Corporate governance has become more crucial in contemporary times as firm grow and raised up in both developed and developing countries (Sethi et al., 2023). The corporate governance is vital in ensuring effective supervision role of corporate board and ensuring protection of shareholders' interests. Good corporate governance practices promote accountability, transparency, and integrity of the board function. The board's unique characteristics can help firm in reducing their dependence on the external environment and improve their performance. In this sense, the recent global crises have motivated numerous corporations worldwide to improve their corporate governance practices because they believe a well-managed board structure can provide good corporate performance.
Recently, the issue of selecting specific board characteristics has increasingly become more essential for corporations worldwide and Jordan, because it reduces the agency conflict between agents and shareholders and protects stockholders interests. Moreover, it motivates management staff to maximize shareholding wealth. Robust evidence confirms that applying corporate governance effectively leads to maximize firm's value (Boshnak et al., 2023; Raboshuk et al., 2023;Alodat et al., 2022;Al Sawalqa, 2021). It is important to look into the board characteristics and how these factors can influence the perfor-

LITERATURE REVIEW AND HYPOTHESES
Over the last decade, there have been many studies investigating links between corporate governance and firm performance in various capital markets (Kiptoo et  . These studies provided different and inconclusive results due to different contextual factors, methodologies, and conceptual models. In this sense, Yu (2022) argued that only 7% of the total conducted previous studies (22 out of 314) in developed and developing economies were targeting the Middle East. Sethi et al. (2023), Khatib and Nour (2021), Kiptoo et al. (2021), and PuchetaMartínez and GallegoÁlvarez (2020) primarily underpinned the agency theory. They provided a strong argument that supports the relationship between corporate governance and firm performance. In this regard, Jensen and Meckling (1976) stated that the primary goal of shareholders is to increase the firm value, and they delegate this goal to their managers. Nevertheless, the managers' interests may conflict with those of the stockholders. Thus, Fama and Jensen (1983) suggested the agency relationship between the principal and the agent. They believe the board of directors is vital in controlling management staff and improving firm performance. However, these studies have shown inconclusive results. They demonstrated the supervision role and ignored the resources provided by board members to the companies. Pfeffer and Salancik (1978) argued that resource dependency theory is important in helping companies to maximize their profit and lower running costs by reducing their dependence on external financing.
The agency theory asserted that large board size inversely affects the performance of any corporation (Guest, 2009 Based on the literature review, the research yields mixed and inconclusive results regarding the impact of board structure on firm value in Jordan. Therefore, this paper formulated the research hypotheses as follows:

METHOD
This paper examines whether board characteristics improve firm value in the Jordanian context. Moreover, it mitigates the vertical agency problem between shareholders and agents. For this purpose, this study considers forty-four listed (non-financial) companies in Amman Stock Exchange (ASE) from 2010 to 2021. The secondary data were collected from the audited financial records of the represented sample. This analysis excluded the financial listed firms due to the different regulatory environments of the financial sector. Valid 528 observation values were available for panel data analysis based on the observation method.
This paper uses Tobin's Q (TOBQ) as a proxy of a dependent variable to capture firm value. This ratio is devoted to the book value of equity subtracted from the book value of assets, added market value of equity, then divided by the book value of assets ( Table 2 shows that all the listed firms have Tobin's Q close to 1. This indicates that the sample of listed firms is stable. The board size has a mean value of 8 directors in the board. This means that these firms have adhered to the minimum require-ments of five members on the board of directors as regulated in Jordan. The result also shows that independent directors were 34% of the board members, indicating that listed firms have compliance with corporate governance principles in Jordan, which achieved the recommended value that a third of the board should be independent directors. On average, only 11.5% of CEOs are simultaneously chairs of the board. The percentage of women members was 2.39%. This implies that the majority of board directors were men.  Table 4 presents the goodness of fit model. This paper performs two optimal fit tests, namely Lagrange Multiplier (LM) and Hausman test, to get the optimal regression model outcomes from OLS, fixed effects, and random effects. The LM test shows that the p-value is less than 0.05, indicating that the random effect is more appropriate than OLS. Moreover, the Hausman test shows insignificant outcomes, concluding that random effect is best out of fixed effect. Hence, the random effects are an underpinning model for panel data estimation.  Hypotheses testing were carried out by using random effects model. F-static is 3.136 and p-value less than 5% indicated the estimated model having good fits (see Table 5). Furthermore, the estimated model presents the regression coefficient estimations. A beta coefficient of board size is positive and insignificant (β = 0.021, p-value = 0.257). The result rejects H 1 , concluding that board size does not improve firm value. Similarly, the beta coefficient of independent directors is negative and insignificant (β = -0.136, p-value = 0.453). H 2 is rejected, indicating that the independent directors in the board will not improve firm value. CEO duality has a positive and significant effect (β = 0.258, p-value = 0.004). This result not support H 3, suggesting that CEO duality maximizes firm value in Jordan. The finding also concludes that the beta coefficient of women directors is negative and insignificant (β = -0.325, p-value = 0.521). Consequently, H 4 is rejected, concluding that women members on the board room do not affect firm value. As for control variables, firm size positively and significantly impacts the value of the Jordanian listed firms (β = 0.118, p-value = 0.010). Similarly, the coefficient of leverage is positive and significant with firm value (β = 0.376, p-value = 0.005). However, liquidity and age are not found to be significant with firm value.

RESULTS
Based on these results, the hypotheses testing indicate the following findings: • The analysis shows high firm value is insignificantly associated with large board size (p< 0.05). This result not supporting H 1 , indicating large board size will not cause an increase in firm value in Jordan.
• The result indicates that firm value is insignificantly associated with the presence of independent directors in the board room (p< 0.05). Thus, H 2 is rejected.
• The analysis shows that firm value is insignificantly associated with female directors (p< 0.05). Therefore, this result rejects H 3, suggesting the female representation in the board will not cause an increase in firm value in Jordan.
• The result implies that firm value is significantly associated with CEO duality (p0.05 > ). That is, if there is an increase in CEO duality by one unit, it will cause an increase in firm value of 0.258 units assuming other factors are constant. This result does not support negative effect as assumed in H 4 .
As for the endogeneity situation, Two Stage Least Square (2SLS) was performed to check whether the current value of the research variables is affected by its value in the preceding period (Wintoki et al., 2012). This test ensures that errors in dependent variables are uncorrelated with the independent variables. This occurs when the firm past values determine the board structure, control variables, and firm value. Hermalin and Weisbach (1998) argued that past poor firm performance would likely cause the shareholders to change the board of directors to ensure healthy board actions, affecting the board structure, control variables, and firm value. This study used lagged values of board characteristics as instrument variables, which added more restrictions for board actions. As shown in Table 5, the results align with the findings in the prior regression model (random effect). All lagged instrument variables are independently estimated. Interestingly, OLS regression was more efficient than two-stage least squares. Hence, this indicates that the RE model employed in this study was superior to 2SLS. As a result, the random effect model predictions are more consistent compared to the findings of twostage least squares (see Table 5).

DISCUSSION
The study shows that some board characteristics affect firm value in Jordan. The findings support prior research that board structure has a significant impact on firm value. In addition, this result provides significant evidence of the validity of agency and resource dependency theories in the context of Jordan.
Board size will not maximize Jordanian firm value, contrary to prior studies that argued that managers can maximize their shareholding wealth (Kiptoo et al., 2021;Riyadh et al., 2019). This evidence conflicts with the resource dependence theory that argues that with a large board size, firms can obtain more funds from the external environment and tend to increase firm value (Pfeffer, 1972). This result is also inconsistent with Fama and Jensen (1983), who affirmed that a small board performs more functionally.
The finding confirmed that the independent directors did not influence Jordanian companies' value, concluding that independent members did not have investment decisions to maximize firm value. This result contradicted other studies that corroborated the importance of independent directors for improving firm performance ( The result validated that CEO duality positively affected the value of Jordanian listed firms, suggesting that the same person serves in both positions, which may create a benefit for firm value. However, this finding was different from Mubeen et al. (2020) and Wijethilake and Ekanayake (2020), but consistent with PuchetaMartínez and GallegoÁlvarez (2020),

CONCLUSION
This study synthesized evidence about board structure's impact on firm value using Jordanian non-financial firms. This issue is considered an exciting topic from an emerging market perspective due to inconclusive results and incomplete research methodology by previous literature.
The results validated the significantly important role of some board characteristics on firm value in Jordan. Thus, factors such as CEO duality, firm size, and leverage positively impacted firm value, conflicting with agency and dependence resource theories and contrary to the research hypotheses. Interestingly, the results provided no evidence that the variables of board size, independent directors, female directors, age, and liquidity affect firm value in Jordan.
This result drew top management's attention to the need to focus on CEOs' satisfaction, achievements, and reputation for maximizing firm value. The result concludes that the powerful CEO duality improves board capabilities to provide valuable resources, positively impacting firm profitability. Thus, CEO positions should be carefully appointed with particular standards because they can impact firm value. To do that, the board should be elected based on leadership qualities, experiences, and professional qualifications rather than shareholders' interests. Moreover, gender diversity through female representation on the board is not commonly practiced in Jordan. Thus, the study motivates the board to reinforce the culture of female representation based on their capabilities and qualification rather than gender equity. Hence, having members on the board with special characteristics is crucial to ensure good board actions.
For future research directions, it is worthwhile to investigate the moderating effect of family involvement on the relationship between CEO duality and firm value. In addition, this study encourages research scholars to conduct further research in the banking sector since the panel data model excludes this industry.