Corporate governance and firm performance: A study of public listed companies in the Kingdom of Saudi Arabia
This thesis examines the relationship between CG mechanisms and firm performance among firms in the Saudi Stock Exchange (Tadawul) for the periods 2007-2011. Two models have been developed using the framework of agency theory, stewardship theory, and resource dependence theory to test this study’s h...
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| Format: | Thesis |
| Language: | eng eng |
| Published: |
2014
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| Subjects: | |
| Online Access: | https://etd.uum.edu.my/4900/1/s91740.pdf https://etd.uum.edu.my/4900/2/s91740_abstract.pdf |
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| Summary: | This thesis examines the relationship between CG mechanisms and firm performance among firms in the Saudi Stock Exchange (Tadawul) for the periods 2007-2011. Two models have been developed using the framework of agency theory, stewardship theory, and resource dependence theory to test this study’s hypotheses. Model 1 comprises three categories of determinants. The first category is board of directors’ characteristics: board Royal family members, board size, independence, board meetings, board financial knowledge, CEO duality, and board multiple directorships. The second category of
determinants is audit committee characteristics: audit committee outside financial expertise, multiple directorships, size, independence, meetings, and financial expertise. The third category is ownership structure: Royal family, non-Royal family, government, and domestic corporate ownership. Model 2, including ownership structure, comprises board of directors’ effectiveness score and audit committee effectiveness score. This study utilizes the Weighted Least Squares (WLS) models. The final sample comprises 573 observations. The results showed that Royal family members, board size, and CEO duality are positively associated with firm performance. In contrast, board meetings, board financial knowledge, and board multiple directorship are negatively associated with firm performance, whereas board independence has no association. Audit committee characteristics, outside financial expertise, size, independence, and meetings are negatively associated with firm performance. In contrast, financial expertise is
positively associated with firm performance, whereas multiple directorships have no
relationship. For both models, ownership structure—Royal family, non-Royal family,
government, and domestic corporations—is positively associated with firm performance.
Board of directors’ effectiveness score and audit committee effectiveness score are positively associated with firm performance. It should be noted that the findings established in this study could be useful to regulators, especially the Ministry of Commerce and Industry (MCI), the Capital Market Authority (CMA), Tadawual, and the Saudi Organization for Certified Public Accounting (SOCPA) to improve CG practices. For companies, this study proposes that they should put more emphasis on
enhancing the role and the quality of the board of directors and audit committee members, as
they are involved in the decisions that improve firm performance |
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