Do Board Characteristics Determine Litigation Risk? Evidence from the Jordanian Banking Industry

This paper investigates how corporate governance can impact the litigation risk of banks with reference to the board characteristics of the Jordanian banking industry. With a dataset of 14 of the banks listed on the Amman Stock Exchange between the years 2013–2023, the study examines how gender diversity on a board, board size, board independence, foreign board representation, and directors’ financial education affect litigation costs. The analysis is based on agency theory and upper echelons theory and uses pooled ordinary least squares regression. The findings indicate that board characteristics have an uneven impact on litigation risk. The presence of female board members is always related to reduced legal costs, which implies that gender diversity improves the quality of monitoring and control over risks. Conversely, an increased board size and increase in foreign directors and directors of financial education are both linked to increased legal expenses, suggesting coordination issues and unfamiliarity with regulations in the cross-border governance environment. Board independence, however, does not demonstrate any statistically significant correlation with litigation risk. The paper adds to the literature by offering new evidence based on a developing economy with a unique institutional environment. The findings have significant implications for regulators, policymakers, and practitioners seeking to design effective board structures that reduce legal and compliance risks in the banking sector.