**1. Introduction**

Corporate governance refers to the processes and mechanisms by which the company is managed in order to achieve the interests of the owners, where good governance is an advantage of the company in the business community. Jordan has adopted corporate governance by issuing a guide to the rules of Jordanian corporate governance since 2007, but it is not mandatory. Previous studies related to corporate governance and its relationship to culture have not been addressed much in developing countries: one of the mechanisms of corporate governance is the board of directors which is considered the most important body that implements governance mechanisms to achieve the interests of owners. Where the principles of corporate governance stipulated rules regarding the board of directors such as independence of the board, the separation between the CEO and the chairman, as well as the board size, these rules assistant the members to conduct their activities effectively. Many studies conducted the relationship between culture and corporate governance. In the Jordan context, there are no related studies on this issue. The current study contributes to the literature as a new study conducted to investigate the impact of culture on corporate governance in the Jordan context for the duration (2013–2018). The study used Board Structure as different proxies to measure corporate governance. This study employed the agency theory and Hofstede's cultural dimensions theory. SPSS program has been used to test the developed hypotheses.

Finally, the study covered the main sections: Introduction, Literature review, Methodology, Empirical Results and Discussion, Conclusion, The importance of research for the future, and Recommendations.

#### **1.1 Research problem statement (question)**

Culture and corporate governance have been considered an important issue in the literature recently. This study aims to investigate the impact of the culture (CL) on corporate governance in terms of Board structure (BS) in Jordanian companies. It is notable after reviewing the literature that there is a gap regarding this issue in Jordan's context. To fill this gap this study will answer the following question:

Is there is an impact of the culture on corporate governance (Board Structure) in Jordan's context?

#### **1.2 Research significance**

The current study tries to investigate the impact of the culture (CL) on corporate governance in terms of Board structure (BS) in Jordanian companies. For this purpose, the study uses the six Hofstede dimensions to measure the culture, namely, Power distance index (PDI), Individualism vs. collectivism (IDV), Uncertainty avoidance (UAI), Masculinity vs. femininity (MAS), Long-term orientation vs. short-term orientation (LTO), Indulgence vs. restraint (IND). To measure corporate governance this study uses different proxies, Board size (BZ); Board independence (BI); Non- CEO duality (NCEO). Using these proxies of Board structure and the six of Hofstede's cultural dimensions will contribute to the literature locally and globally, since this combination of the six dimensions and the board dimensions has not been used together in previous studies.

#### **1.3 Research objectives**

The main objective of the study is to investigate the impact of the culture on corporate governance (Board Structure) in Jordan context.

*The Impact of the Culture on Corporate Governance (Board Structure) in Jordan Context DOI: http://dx.doi.org/10.5772/intechopen.99136*

#### **1.4 Research theoretical framework**

This paper used the agency theory and Hofstede's cultural dimensions theory as the theoretical framework to investigate the impact of the culture on corporate governance (Board Structure) in Jordan companies. Board structure is the dependent variable, and Hofstede cultural dimensions are the independent variables. **Figure 1** show the conceptual framework of paper.

### **2. Literature review**

Many studies have been conducted on culture and corporate governance and their relationship with performance. While, there is a lack of studies that addressed the relationship between culture and corporate governance particularly, in the Jordan context. Some studies conducted on culture and corporate governance that confirmed that there is a relationship between culture and corporate governance. Where the culture in the country influences corporate governance "in [1]". Furthermore, culture impacts the tools of corporate governance. This is because the culture of the organization is affected decision-makers particularly their values. Thus, this affects corporate governance "in [2]". Empirical studies have been reviewed on this issue. Where the literature indicated that (Licht, Amir) is considered one of the famous authors who conducting many studies on culture, he indicated in his study "in [3]" that it is necessary to pay attention to culture when analyzing the mechanisms of governance in any organization. Where cultures can be compared through it.

With regard to the board of directors, the culture of the country plays a critical role in influencing it, as "in [3]" noted that Western Europe supports gender diversity in the boards of directors. Whereas in developing countries is characterized by a weak control as well as weak governance, which negatively affects foreign investment "in [2]", where investors prefer large firms with strong corporate governance that is that takes into account the culture "in [4]".

#### **2.1 Agency theory**

Agency theory suggests that there are conflicts of interest between principal and management. This management conducts the activities on the behalf of the principal. The Agency theory is established to clarify corporate governance and the conflict of interest between the principal and management "in [5]". This theory,

**Figure 1.** *The conceptual framework of paper.*

suggests mechanisms represented in good corporate governance that eliminating the conflict and the Agency's problems "in [6]".

#### **2.2 Hofstede cultural dimensions theory**

Hofstede's cultural dimensions theory is developed by Greet Hofstede, it is the structure of the connection between cultures "in [7]". This study employed the Hofstede cultural dimensions CL in terms of (Power distance index (PDI), Individualism vs. collectivism (IDV), Uncertainty avoidance (UAI), Masculinity vs. femininity (MAS), Long-term orientation vs. short-term orientation (LTO), Indulgence vs. restraint (IND) as the (Independent variable).

#### **2.3 Board structure**

The literature presented different dimensions to measure corporate governance, one of these dimensions is the board structure, where literature defines the board of directors as a number of members appointed by shareholders to achieve their interests "in [8]". The board of directors is considered a power of the firm "in [3]". Where the board of directors consists of executive members and non-executive members, the non-executive members should be independent. The current study employed the board structure in terms of Board size (BZ), Board independence (BI), and Non- CEO duality (NCEO) as the (dependent variable DV).

#### *2.3.1 Board size (BZ)*

The board size is referred to the total number of board members. The literature regarding the board size is mixed, some studies indicated that the Larger boards are not preferred since there are difficulties in the meeting between the members "in [9]". Furthermore, a large board means bad communication and coordination "in [10]". On the other hand, some studies indicated that the large board has experience and knowledge that can be useful in the taking a right decision.

#### *2.3.2 Board independence (BI)*

Board independence is considered an important tool of corporate governance that eliminates agency cost. The literature defined the independent members of the board that the members who own a part of the shares of the firms "in [11]". These members are controlling the managers on the behalf of the shareholders that assure that the firm applying good corporate governance "in [12]". Furthermore, the independent members are not tended to achieve their private goals "in [7]". The agency theory advocate that the board of directors should be independent, and prefer the outsider members should be more than rather than the insider, this leads to good controlling "in [9, 13]".

#### *2.3.3 Non-CEO duality (NCEO)*

According to the agency theory, the separation between the CEO and the chairman is considered one of the important governance mechanisms, as in the event that these two functions are combined, this will negatively affect the decisions of the board of directors and this weakens the independence of the board, as many studies have shown that the separation enhances corporate governance "in [14–16]".

*The Impact of the Culture on Corporate Governance (Board Structure) in Jordan Context DOI: http://dx.doi.org/10.5772/intechopen.99136*

#### **2.4 The relationship between culture and board structure**

Behavioral science theories highlight the role of cultural values and attitudes in shaping board-and-CEO relationships regarding controlling and strategy development. The culture through cultural orientations plays an important role in formulating the board composition. The cultural orientation in the institutional environment in a particular country could be towards a focus on equality by allowing gender diversity on boards, as is the case in Western European countries. In European societies that focus on entrepreneurship, it is characterized by individuality, low uncertainty avoidance, the composition of the board of directors directing to the interest of (external) shareholders by providing more independent members.

Regarding the relationship between culture and board structure, the literature has poor studies regarding this issue. "in [17]" found there is a positive relationship between the outsider member and individualism, uncertainty avoidance, femininity, and power distance, Furthermore, he found that found there is a positive relationship between the combine of the chairman and the CEO and individualism, uncertainty avoidance, and power distance. The following **Table 1** summarize the most of the empirical studies regarding the culture and corporate governance.

Finally, Based on the above, It is notable there is a gap in the literature regarding the impact of culture on corporate governance. Particularly, in the Jordan context. This study will fill this gap by investigating the impact of the culture on corporate governance (Board Structure) in Jordan companies in terms of Board Size (BS); Board Independence (BI); Non- CEO duality (NCEO).

### **3. Methodology**

#### **3.1 Sample and data collection**

The sample of this paper consists of the (105) companies from the financial sectors companies in Jordan that are listed in Amman Stock Exchange for the period (2013–2018). The corporate governance (Board structure) data were collected from the annual report from Amman Stock Exchange (ASE). And the data of cultural dimensions were collected through questionnaires that was distributed to the selected companies.

#### **3.2 Model of study**

The current study employed the multiple regression model with board structure BS as a dependent variable DV. The aim of the study is to investigate the impact of the culture on corporate governance (Board Structure) in the Jordan context. Hofstede's Cultural Dimensions HCL is the independent variables IDV. The study adopts the following multiple regression model:

$$\text{BS} = \alpha + \beta \mathbf{1} (\text{PDI}) + \beta \mathbf{2} (\text{IDV}) + \beta \mathbf{3} (\text{MAS}) + \beta \mathbf{4} (\text{UAI}) + \beta \mathbf{5} (\text{LTO}) + \beta \mathbf{6} (\text{IND}) + \varepsilon \tag{1}$$

Where:

BS: Board Structure (Board size (BZ), Board independence (BI), and Non- CEO duality (NCEO)**.**

PDI: Power Distance Index**.**

IDV: Individualism versus collectivism**.**

MAS: Masculinity versus Femininity**.** UAI: Uncertainty Avoidance index**.** LTO: Lon0g-versus Short- Term Orientaion**.** IND: Indulgence versus Restraint**.** α:Is the constant**.** β:The coefficiet of the independent variables**.** ε:Residual**.**
