Corporate governance quality and the financial crisis in the United Arab Emirates

What is it about?

This study evaluates corporate governance practices of listed firms in the UAE and investigates whether the corporate governance system mitigates/exacerbates the impact of the critical factors that created the financial crisis, namely, leverage and risk, on firm performance during crisis and non-crisis times. The study constructs a corporate governance index not only to examine the dispute of the role of corporate governance during the crisis, but also its influence on other factors that fuelled the crisis. A firm-level panel data is used that spans the period 2008 to 2012 of all listed firms on ADX and DFM

Featured Image

Why is it important?

The study argues that the economic performance, unlike the accounting performance, is influenced by the perspective of investors and market reaction. The black swan theory explains that individuals change their perspectives as a result of black swan events (i.e. the global financial crisis). Results show that corporate governance system may negatively influence firm performance, but positively impact other factors that influence performance. The results provide insights of how the corporate governance system is connected to the firms’ strategy. Policy makers and practitioners should take into consideration the connectivity of corporate governance to the internal and external environment of the firm.

Perspectives