CONSTITUCIÓN DE LA REPÚBLICA

In 2005 the Jordanian Corporate Governance Association was established to promote the implementation of effective corporate governance practices throughout Jordan. In addition, in 2005 a draft of a corporate governance code was available but it was not enforced (Shanikat & Abbadi, 2011: 98). However, since 2007 an official code of corporate governance that is based on the OECD principles exists for the banking sector and is enforced by the Central bank in Jordan and in 2008 a mandatory corporate governance code for shareholding companies listed on the ASE was approved which became effective in January, 200926. However, before the actual issuance of the Jordanian code of corporate governance took place, the Jordanian government had already built the corporate governance regulatory framework under the sponsorship of the OECD, through the issuance of the Companies Law of 1997 and the SL of 2002 (Al-Akra et al., 2009; 2010a; Shanikat & Abbadi, 2011). In this regard, Shanikat & Abbadi (2011: 96) argue that Companies Law and SL in Jordan cover the different aspects of corporate governance framework which is made up of the legislative framework and government oversight, the capital market, disclosure and accounting standards, transparency in privatisation, effective supervision of the board of directors, preservation of property rights and protection of minority rights. The Companies Law mainly covers some corporate governance rules that relate to the auditor. On the other hand, the SL helps in activating the rules of governance by defining market regulations, the issuance of shares or bonds and trade procedures. It also states the responsibilities of issuers of securities, brokers and auditors, and the requirements for listing in the stock exchange, protection procedures for minority rights and the requirements for disclosing important information. Furthermore to preserve transparency, the law prohibits related party transactions, promoting rumours, misleading investors and disclosing any matters that may adversely affect the capital market (Shanikat & Abbadi, 2011: 96).

25 _{For more details see: AMF Website,}

http://www.amf.org.ae/sites/default/files/econ/amdb/AMDB%20Performance/Yearly%20Performance/en/prv_yearly_s

ummary. Accessed: 22/3/2010.

26

For details of articles in this code see: the ASE Website, http://www.ase.com.jo/en/key-statistics-ase. Accessed: 29- 6-2010.

The review of the ROSC (2005) concerning the assessment of corporate governance practices in Jordan before the issuance of the code of corporate governance for shareholding listed companies in 2008 indicated the existence of relatively good disclosure practices. However, although the Companies Law and SL provide many of the rules that regulate corporate governance practices of publicly-listed companies, such rules are not as strong as the OECD corporate governance principles (ROSC, 2005). The ROSC (2005) assessment of Jordan’s compliance with each of the OECD Principles of Corporate Governance promulgated that, the corporate governance requirement not materially observed by listed companies on the ASE was board independence. In practice, the boards of most companies lack real independence from controlling shareholders and from management (ROSC, 2005). Thus, applying the Jordanian Code of Corporate Governance on comply or explain basis is expected to improve governance practices within the Jordanian context.

The important issue that is expected to have a negative impact on the levels of compliance with IFRSs disclosure requirements, and hence, transparency by companies listed on the ASE, is the non-existence of an accounting and auditing standard setting body in Jordan which may result in the absence of an official translation of the IFRSs. Consequently, this may result in divergent practices as preparers of financial statements and auditors will interpret the standards according to their understanding.

4.4

Summary

This chapter has provided an overview of the economic environment, specifically the business regulatory framework and capital market development within Egypt and Jordan. As indicated, similar to the majority of MENA countries, Egypt and Jordan mandated the adoption of the IFRSs in 1997. Initially, mandating IASs/IFRSs in both countries was a response to international lending institutions’ pressure.

On the other hand, as indicated, in order to align with international practices both countries established the regulatory framework for businesses operating within their jurisdictions, and developed their capital markets. In both countries the Company Law and the Securities Law, referred to in Egypt as the Capital Market Law, represent the core for the regulatory framework for listed companies.

With respect to corporate governance practices, Egypt has been one of the leaders in the region in creating corporate governance frameworks, and developing supporting institutions such as the EIoD to tackle some of the corporate governance challenges faced by the market. With respect to Jordan, since 2007 a code of corporate governance based on the OECD principles exists for the

banking sector and in 2008 a code of corporate governance for shareholding companies listed on ASE was approved which became effective in January, 2009. However, the regulatory framework in Jordan initially provides the basis for good corporate governance practices through the requirements of the Companies law of 1997 and the SL of 2002.

Based on the review of the context within Egypt and Jordan, it is appreciated that enormous developments in the regulatory requirements have occurred during the last two decades. However, to get the best from their de jure compliance with the international best practices, there must be a de facto compliance with these requirements. The awareness in the scrutinised countries about the importance of de facto compliance with the international best practices will enhance the globalisation of the performance of their stock exchanges, attract more local and foreign investments, and hence, achieve the proposed financial and economic development objectives.

CHAPTER FIVE

Research Philosophy and Methodology

5.1

Introduction

The main concern of any researcher is to answer his/her research question(s), which requires him/her to consider the research methodology and the research method(s) that will be employed. Additionally, the researcher must decide within which research paradigm his/her study will be undertaken (Burrell & Morgan, 1979; Crotty, 2007; Baker & Foy, 2008).

Within the setting of the proposed theoretical foundation discussed in Chapter Two, the empirical part of this study assesses the level of compliance with IFRSs by non-financial companies listed on the stock exchanges of Egypt and Jordan, simultaneously seeking to determine whether a relationship exists between levels of compliance and corporate governance structures in the two capital markets. To best meet these objectives the researcher employs the sequential explanatory triangulation design.

In providing a detailed discussion of the methodology and methods used to test the research hypotheses in order to meet the study’s objectives, the rest of this chapter is organised as follows. Section 5.2 discusses research philosophy, section 5.3 introduces the research hypotheses, section 5.4 describes the research design and methodology, section 5.5 indicates the research methods, section 5.6 discusses data analysis, and section 5.7 concludes.