Corporate Governance Mechanisms and Voluntary Disclosure Compliance: The Case of Banks in Jordan

The current study comes to discuss the role of Central Bank in developing the corporate governance best practices in Jordanian banks. In addition, the study focuses on investigating the extent to which Jordanian banks are comply with the corporate governance code for banks in Jordan as outlined by Central Bank in 2007. Furthermore, it investigates the extent to which banks comply with the corporate governance code for banks in Jordan in transparency and disclosure. Based on the annual financial reports of 13 banks listed in Amman Stock Exchange (ASE) for 2012, the results indicated that the overall compliance with corporate governance code for banks in Jordan is 90.9%. The results show that the lower compliance is concentrated in audit committee as only 70.5% of the banks do comply with its rules as outlined in corporate governance code for banks. The expected reasons for such low compliance were discussed in the current study. The compliance rate with board of directors’ rules and general corporate governance information is 90.9% and 100% respectively. After computing the voluntary disclosure index, the results show that the average disclosure score is 61.3%, which is unsatisfactory. Apart from employee information, the results show high consistency in disclosure practices among Jordanian banks. The unsatisfactory percentage of disclosure implies that there are several factors may hinder banks from disclosing some sensitive information. The findings of the study have many applications for decision makers in Jordan and other developing countries.