Corporate Governance & Earnings persistence: An Empirical Study of Palestine

Abstract

This Research investigates the link between corporate governance and earning persistence of companies listed on the Palestinian exchange (P.E.X.) using a purposive sample method of 18 companies listed in the Palestine Exchange (P.E.X.). The sectors included in the sample are the investment, industrial, and services sectors. While the remaining sectors, the banking, and the insurance sector, are excluded. The data used is collected from annual reports and financial statements. The period covered is years from 2014 to 2019. The results are concluded using the Generalized Method of Moments (G.M.M.). The study results revealed that the company's earnings were persistent during the study period measured by the ( β )coefficient. In addition, the panel data analysis of G.M.M. results revealed that good corporate governance practices significantly affected earning persistence. Corporate governance measured by an effective board of directors is crucial for sustainable earnings; corporate governance better influences earning persistence and, more significantly, when all Board attributes work together and interact jointly. This paper makes an essential theoretical contribution by building on prior knowledge as the research result ascertains the influence of corporate governance, measured by an effective board of directors, in increasing earning quality, mainly measured by earning persistence. It also provides empirical proof of the importance of good corporate governance in sustaining earnings which stakeholders and researchers should consider its primary effect in boosting the company's performance. To my knowledge, this study is the first to examine the role board of directors on earnings persistence which will assist policymakers in concentrating their efforts on promoting corporate governance between Palestine firm’s.