An Empirical Analysis Of The Impact Of Board Structure On The Performance Of Large Saudi Firms

Habbash, Murya; Bajaher, Mohammed Saleh

doi:10.34120/0430-022-001-005

Cited by 17 publications

(10 citation statements)

References 26 publications

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“…Winsorizing was not used to compress distributions such as that of ROE, which had a range of − 983.941 to 56.586, because I was concerned about changing the data. I did not want to cause measurement error in the estimates only to deal with outliers that might cause missing data characteristics (Gujarati 2004). In Table 5, the RE model's board composition (%IB) shows no significant relationship with the performance measures.…”

Section: Resultsmentioning

confidence: 99%

The effect of board composition and managerial pay on Saudi firm performance

Al‐Faryan

2021

Rev Quant Finan Acc

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Using five empirical methodologies to account for endogeneity issues, this study investigates the effects of board independence and managerial pay on the performance of 169 Saudi listed firms between 2007 and the end of 2014. Studying board independence and managerial pay utilises the main internal governance mechanism in relation to firm performance; therefore, the effect of the 2009 exogenous regulatory shock on board independence was also examined to learn whether it impacted firm performance. The empirical results show that the board composition–performance relationship is endogenous. Strong evidence is found through the dynamic generalised method of moments estimation, which indicates that board composition has a positive relationship with return on assets, and poor past performance of listed firms has a negative impact on the current level of performance. The difference-in-differences approach results show a positive relationship between board composition, stock returns, and Tobin’s Q. The findings also reveal that managerial pay has a positive relationship with firm performance, although when endogeneity is considered, there is a smaller positive relationship and a decrease in significance levels. Thus, pay-for-performance in Saudi Arabia matters, and firms are not simply controlled by the government. The results of this study have implications for both policy makers and investors. In particular, policy makers and Saudi regulators can evaluate the impact of Saudi corporate governance arrangements and, in so doing, highlight changes in corporate governance arrangements that need to be made to achieve their economic objectives, such as Vision 2030. This study also contributes to the literature by showing the importance of considering endogeneity in studies.

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Section: Resultsmentioning

confidence: 99%

The effect of board composition and managerial pay on Saudi firm performance

Al‐Faryan

2021

Rev Quant Finan Acc

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“…Large boards are more symbolic, but poor communication associated costs may be high than benefits (Habbash & Bajaher, 2014). This study adopted institutional investors, multiple bank boards and independence for board structure for they have been used by previous researchers.…”

Section: Hypotheses For the Studymentioning

confidence: 99%

“…Larger boards may enhance access to a variety of resources and improved executive supervision (Bredart, 2014). Large boards are more symbolic, but poor communication associated costs may be high than benefits (Habbash & Bajaher, 2014).…”

Section: Introductionmentioning

confidence: 99%

Corporate Governance, Financial Performance and Firm Value;

Ochego¹,

Omagwa²,

Muathe³

2019

IJFBS

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Firm value is dependent on corporate which leads to increased value. High valued firms attract more investors. Towards firm value protection, minimum capital requirements were raised by the Central Bank of Kenya from 250 million to 1 billion shillings on commercial banks to cushion bank shareholders value. Despite the increased oversight and regulatory efforts on corporate governance to protect and enhance firm value, some commercial banks have recorded low firm value. Hence, this study sought to investigate the mediating effect of financial performance on the relationship between corporate governance and firm value of commercial banks in Kenya. The study was anchored on Agency Theory. Explanatory research design was adopted. Target population was forty four Kenyan commercial banks, where a census was conducted. Secondary data was collected from published financial statements and bank websites for the period 2009 to 2018. STATA version 13.0 was used for data analysis. Descriptive and inferential statistics specifically panel regression was used in data analysis. The study findings established that there is a statistically significant effect between financial performance and firm value of commercial banks in Kenya. Therefore, the study concluded that firms with good financial performance have high firm value. And as such, these calls for the management of the commercial banks improve financial performance which will go a long way in improving firm value. There is also need for Central bank of Kenya, Capital Markets Authority and Nairobi Securities Exchange to emphasis on corporate governance and short term goals to enable achievement of long term goals .

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“…Bohorquez et al (2018) found a positive relationship among a sample of different countries, concluding that most independent directors are more likely to create value for firms. Habbash and Bajaher (2015) and Altuwaijria and Kalyanaraman (2016) similarly found a positive relationship in Saudi Arabia. More recently, Tulung and Ramdani (2018) found that board independence is positively associated with Indonesian firms’ performance and argued that independent directors improve firm performance through managers’ effective monitoring and control.…”

Section: Theoretical and Empirical Frameworkmentioning

confidence: 75%

Board independence and firm performance: evidence from Kuwait

Al‐Saidi

2020

IJLMA

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Purpose This paper aims to reduce the knowledge gap by using a large sample and different regressions while controlling the endogeneity and causality issues. Design/methodology/approach This study used the ordinary least square (OLS) and two stage least squares (2SLS) regressions to control the endogeneity and causality problems; this estimation strategy allows for comparison of both estimates to identify any inconsistency and biases in the parameters. Findings General speaking, this study found that board independence negatively affected firm performance based on Tobin’s Q only and the relationship between the two variables ran from board independence to firm performance but not vice versa. Originality/value The current independent directors are not adding value to Kuwait’s listed firms. Some directors who represent large shareholders and the conflict between large shareholders and small shareholders could affect the role of independent directors in Kuwait. To best of the researchers’ knowledge, this study is the first to consider board independent after controlling the issues of endogeneity and causality in Kuwait; thus, the results could be useful for Kuwaiti firms, regulators and policymakers.

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An Empirical Analysis Of The Impact Of Board Structure On The Performance Of Large Saudi Firms

Cited by 17 publications

References 26 publications

The effect of board composition and managerial pay on Saudi firm performance

The effect of board composition and managerial pay on Saudi firm performance

Corporate Governance, Financial Performance and Firm Value;

Board independence and firm performance: evidence from Kuwait

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