Impact of the board of directors’ characteristics on firm performance: A case of Bahraini listed firms

Abstract

This study aims to examine the impact of the characteristics of the board of directors (BOD), namely board independence, board size, frequency of board meetings, and board gender diversity, on firm performance. This quantitative study uses data from all firms listed in the Bahrain Bourse for 2019 and 2020. Data on BODs were taken from the companies’ governance reports, while data on firm performance, namely return on assets (ROA), return on equity (ROE), and earnings per share (EPS), were taken from annual reports. Based on the ordinary least squares (OLS) approach, the results show insignificant relationships between BOD characteristics and firm performance. Board independence, size, frequency of meetings, and gender diversity insignificantly enhance Bahraini firms’ performance. The results indicate that firms may need to effectively implement BOD mechanisms. Moreover, other factors may moderate the impact of BOD mechanisms on firm performance. Hence, the study suggests a need for more regulations and policies to increase the effectiveness of board members. This study alerts policymakers, firms’ shareholders and stakeholders, and researchers to the need to increase directors’ roles in boosting company performance, especially in developing countries, where it is complicated to force business to follow best governance practices.

Keywords

• board of directors
• corporate governance
• firm performance
• gender diversity
• independence
• meeting