Analysing the Effectiveness of Board Governance in Mitigating Agency Costs: Lessons from Industrial Firms in Emerging Markets

Authors

DOI:

https://doi.org/10.35875/pd809d10

Keywords:

Board Governance, Agency Cost, PEX, ASE, Emerging Markets

Abstract

Objective: This research examines the influence of board governance, specifically board size, independence, gender diversity, financial expertise, CEO's duality, and managerial ownership, on agency costs within industrial firms in Palestine and Jordan.

Methodology: The research adopts a quantitative approach to investigate the impact of board governance on mitigating agency costs in listed industrial firms in the two countries for the period 2011–2020. The sample consists of 42 industrial firms, with secondary data primarily collected from annual reports. To analyse the dataset, the panel regression methods has been applied.

Findings: The findings indicate that board governance, characterized by appropriate size, independence, diversity, and financial expertise, play a significant role in alleviating inefficiencies related to agency conflict. The research highlights the importance of tailoring corporate governance to the specific economic and cultural contexts of countries in emerging markets.

Implications: The results contribute to the existing literature by offering empirical evidence of the effect of board dynamics on agency costs. In practice, the strategic leveraging of the unique attributes of the board of directors provide firms with a competitive advantage.

Conclusion: Board governance effectiveness plays a pivotal role in mitigating agency costs in Palestinian and Jordanian industrial firms. The most influential characteristics that make a positive impact on organizational performance are independence, appropriate size, and financial literacy. The findings highlight that governance practices should be adapted to the regional contexts, accordingly the implications for improving governance within emerging markets are recommended.

Author Biographies

  • Dr. Saed Al-Koni, An Najah National University

    PhD in Accounting from Wuerzburg University, Germany (1999), Professor at An-Najah National University. His research focuses on financial reporting, corporate governance, and auditing. He also served as Minister of Local Government and Chief of the Prime Minister’s Office in Palestine.

  • Dr. Mohammad Najjar, An Najah National University

    Associate Professor and HR Director at An-Najah National University. Holds a PhD in Management Science from Lancaster University, UK. His research focuses on sustainable supply chains, blockchain, and complexity theory.

  • Dr. Abdulnaser Nour, An Najah National University

    Professor of Accounting with a PhD from Rajasthan University (1996). Former dean at several Jordanian universities, with over 120 published papers. His research interests include corporate governance, intellectual capital, and CSR.

  • Mohannad Nabulsi, An Najah National University

    Holds a Master’s in Accounting (2023) from An-Najah National University. He has 20 years of experience at PALTEL and works as a freelance financial consultant specializing in financial analysis, budgeting, and ERP systems.

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Published

2025-06-30

Issue

Vol. 28 No. 1 (2025)

Section

Articles

Categories

How to Cite

Al Koni, S., Najjar, M., Nour, A., & Nabulsi, M. (2025). Analysing the Effectiveness of Board Governance in Mitigating Agency Costs: Lessons from Industrial Firms in Emerging Markets. Al-Balqa Journal for Research and Studies, 28(1), 11-34. https://doi.org/10.35875/pd809d10