Corporate Governance, Firm Performance and Dividend Policy: Evidences of Jordanian and Australian firms

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CHAPTER 03: INSTITUTIONAL CONTEXT IN JORDAN AND AUSTRALIA1

3.1. Introduction1

3.2 Institution Context in Jordan2

3.2.1 An Overview of Economics in Jordan3

3.2.2 Major Sectors of the Jordanian Economy4

3.3. An Overview of Capital Markets in Jordan5

3.3.1 The Amman Financial Market (AFM)7

3.3.2 The Amman Stock Exchange (ASE)9

3.3.3 The Securities Depository Centre (SDC)12

3.3.4 The Jordan Security Commission (JSC)12

3.4 Market Structure in Jordan13

3.4.1 Primary Market13

3.4.2 Secondary Market13

3.5 Finance Setting in the Jordanian Capital Market14

3.5.1The Banking System in Jordan14

3.5.2 Companies Law in Jordan15

3.6 Corporate Governance in Jordan16

3.7 Institutional Context in Australia19

3.7.1 An Overview of Economics in Australia20

3.7.2 Major Sectors of the Australian Economy23

3.7.3 Australian Stock Exchange25

3.7.4 An Overview of the Australian Capital Market (1990-2012)28

3.7.5 Market Structure in Australia29

3.7.6 Financial System Development in Australia31

3.7.7 Legislation and laws related to the capital market in Australia33

3.7.8 Corporate Governance in Australia34

3.8 Summary39

REFERENCES41

CHAPTER 03: INSTITUTIONAL CONTEXT IN JORDAN AND AUSTRALIA

3.1. Introduction

Corporate governance is defined by a number of researchers and scholars. The variation in the definitions is primarily due to the differences in the perspectives regarding corporate governance. The requirements of corporate governance have been developed in most of the countries. Corporate governance is about ensuring the decisions which are made in high interest of the organisations (Tariff, 2006). In such a situation, there must be some monitoring and control on the part of the board of directors. During the past few years, countries all around the globe have realised the importance of a regime of corporate governance, which has provided a platform for the efficiency and integrity of market. Corporate governance has also facilitated the growth of the economies all around the world. Formulating measures for effective corporate governance is considered to be a complex task for the legislators (Shanikat, 2007).

Corporate governance is related to the mechanisms through which the investors of corporations obtain return on investments (Seal, 2006). Hence, the suppliers of finance use corporate governance in order to obtain a return on their investments that will reflect a crucial link between the board and the shareholders. The residual claimant, shareholders, elected members of the board and the boards, as established in the law of state and owes obligations to the shareholders (Seal, 2006). An inclusive perspective of the organisation and their corporate governance have argued that the firms are not just managers, boards, shareholders, debt holders and the other participants who are part of the corporations structure, for example, suppliers, employees, customers and the political environment, including regulations and laws (Qais and Asmaa, 2011).

This chapter of the dissertation incorporates the institutional context of Jordan and Australia. This chapter of the dissertation incorporates an overview of economics in Jordan, an overview of capital markets in Jordan, Amman Financial Market, development of Jordanian Capital market, Amman Stock Exchange, The Securities Depository Centre, financial setting in Jordan, corporate governance in Jordan, an overview of economics in Australia, development of Australian Capital Market, Australian Stock Exchange and financial settings in Australia.

3.2 Institution Context in Jordan

The government of Jordan has adopted a comprehensive policy ...