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Top1. Introduction
Corporate financial performance is considered to be the most imperative concern of all users of financial reports. Financial performance best measures a firm’s sustainability, shows the achievement of a firm's goals, and should be maintained and enhanced continuously to attract investors and maintain good relationship with other stakeholders (Badriyah et al., 2015). Performance assessment became more integral in accounting literature, because financial performance enhancement increases both the value of a company and the economy as whole. A firm's performance is an appropriate key to making the right decisions to support business activities in the economy. Corporate financial performance has been a research endeavour in business research in general and in accounting specifically. Business practitioners consider it as vital indicators for effectiveness and efficiency and in return it represent an implicit measure for the company survival (Naser & Mokhtar, 2004).
With the increased global competitiveness and challenges, countries have become more interested in improving financial performance gives the participation ability in global economy, encourage direct foreign investments and maintain sustainable economic growth. Egypt is an example of those countries that have placed great interest and effort in improving corporate financial performance. This has resulted in issuing the competition law which covers both private and public operators and that prohibits anticompetitive agreements, concerted practices, and abuses of dominant or monopolistic positions. Egypt is trying to implement the recommendations of the International Monetary Fund (IMF) and the World Bank (WB) and take additional measures to enhance the country’s competition climate and help promote private sector investments, which in turn could be reflected on firm characteristics.
Defining and measuring Financial performance is a challenging issue, because it differs depending on the type of organisation or its objectives. One of the definitions is that it reflects the consequences of a company’s operations and policies in financial terms, such as ROI, ROA, ROE, value added ...etc (Business Dictionary, 2013). A variety of models for measuring financial performance have been developed in the accounting literature which includes multiple criteria analysis. Corporate financial performance can be measured using accounting-based measures such as ROA, ROE, ROI and ROS or market-based measures such as Tobin’s Q and market return. Researchers consider accounting-based measures to be a reflection of short-term financial performance while market-based measures to be a reflection of long-term financial performance. Both measures are widely accepted and are considered to be valid indicators for measuring financial performance.
Corporate financial performance can be affected by internal factors related to the firm - called firm specific determinants- such as firm size, age, liquidity, leverage, asset types and listing on the foreign stock market…. etc, as well as corporate governance mechanisms such as board size, board composition, audit committee, quality of external auditor, and internal auditor. Moreover, the external environment could affect the firm's financial performance, such as the economy, industry type …. etc. This study considers the internal factors only, specifically the firm specific determinants while controlling for the corporate governance mechanisms.
A number of studies were conducted to explore the relationship between firm characteristics and financial performance, in both developing and developed developing countries such as (Egbunike & Okerekeoti 2018; Ahmed et al. 2018; Mater & Eneizan 2018; Omodero & Ogbonnaya 2018; Mafumbate et al. 2017; VU & Phan 2016; Lazar 2016; Pouraghajan & Malekian 2012; Siminica et al. 2012; Onaolapo & Kajola 2010; Margaritis & Psillaki 2010; Ebaid 2009; Zeitun & Tian 2007; Wei et al. 2005).