Compliance with the principles of corporate governance : different perspectives from Jordan

This study aims to determine the extent to which Jordanian banks comply with the principles of Corporate Governance from the viewpoint of the related regulatory bodies. We rely on the corporate governance topics discussed in the World Bank’s ROSC Report. Sixty postal questionnaires have been distributed randomly to the Audit Committee Members in Jordanian Banks, Control and Governance Department in the Central Bank of Jordan and in the Jordan Securities Commission (JSC), to empirically explore the extent of compliance with the OECD’s Principles of Corporate Governance from the view point of those parties. The response rate was 80% which represents 48 out of 60 questionnaires. The study has found that the Jordanian Banks comply with the OECD Principles of Corporate Governance, the average score of Audit Committee shows that the Jordanian Banks earned a perfect 5.00 score for both the Role of Stakeholders in Corporate Governance and Disclosure and Transparency categories, while the lowest score was in the Rights of Shareholders category of (3.33). The Average score by Category of Control and Governance Department in the Central Bank of Jordan has shown that the banking sector of Jordan is moderately saving the rights of shareholders and so the Responsibility of the Board (the average is 2.5 and 3.00) respectively, the analysis of JSC score has shown an approximate results that obtained from the Central Bank of Jordan departments. This identification can be interpreted as showing that the Central Bank of Jordan and JSC responses are mature and objective, and they are applying the same tools and pillars to control and oversight the banking sector of Jordan. In conclusion, the overall average scores of all tested parties are supporting that the banking sector of Jordan is complying with the (OECD) Principles of Corporate Governance. The results of the study recommend continued enforcement of the rights of stockholders in particular and the responsibility of the Board. More emphasis should be placed on the rights of stockholders and related party transactions. We recommend a high level strategic review of the different functions of the Central Bank of Jordan and the JSC, so that functional responsibilities can be better aligned concerning the Rights of stockholders and Board Responsibilities. These results could be utilized to conduct further analysis regarding the attributes of those tested Audit Committees, the proposed impact of ownership structure on compliance with CG, and Equitable Treatment of Shareholders.