Corporate governance and firm performance in the Saudi banking industry

Almoneef, Ahmed; Samontaray, Durga Prasad

doi:10.21511/bbs.14(1).2019.13

Cited by 43 publications

(54 citation statements)

References 19 publications

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“…However, board composition and firm performance show no significant relationships, while board meetings and firm performance display positive relationships. The results of Almoneef and Samontaray (2019) and Alhassan et al (2015) appear to be mixed in their support for each other and with past studies for consistency and comparison. Al-Sahafi et al (2015) investigate 11 Saudi banks between 2009 and 2012.…”

Section: Saudi Literaturementioning

confidence: 62%

“…Although Alhussayen and Shabou (2016) use the 2SLS method, this too can be sensitive to and influenced by the instrument. Almoneef and Samontaray (2019) argue that many studies exclude the banking sector from their analyses; thus, they focus exclusively on the banking sector. The authors investigate the impact of corporate governance on the performance of Saudi banks from 2014 to 2017.…”

Section: Saudi Literaturementioning

confidence: 99%

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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: Saudi Literaturementioning

confidence: 62%

Section: Saudi Literaturementioning

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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“…This paper examines how corporate governance mechanisms impact the performance of Saudi listed firms. Descriptive and multivariate regression analyses are applied to test the correlation between corporate governance mechanisms and firm performance, consistent with the extant literature (Al-Sahafi et al, 2015;Naushad and Malik, 2015;Farhan et al, 2017;Almoneef and Samontaray, 2019).…”

Section: Methodsmentioning

confidence: 91%

Corporate Governance Mechanisms and Firm Performance in Saudi Arabia

Boshnak¹

2021

IJFR

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This paper examines the impact of corporate governance mechanisms including board size, independence, and meeting frequency, audit committee size and meeting frequency, CEO duality and ownership concentration on the operational, financial and market performance of Saudi listed firms using a contingent theoretical-based framework drawing on agency theory, stewardship theory and resource dependence theory. This study examines 210 listed Saudi Stock Exchange firms over the timeframe 2017 to 2019. The paper applies both a manual content and regression analysis approach. The results show that firm performance deteriorates with board size and independence, audit committee and meeting frequency, and the presence of CEO role duality, while performance improves with board meeting frequency and ownership concentration. Thus, Saudi firms should respond by maintaining smaller boards and more frequent meetings, keeping the Chair and CEO roles separate, and maintaining smaller audit committees with more focused meetings. Further, the appointment of independent directors only makes a meaningful contribution to firm performance where they are truly independent. Finally, more concentrated ownership tends to encourage better firm performance due to the regime of monitoring and discipline concomitant with more powerful shareholders. The implications of this paper are threefold. First, the implementation by Saudi Arabia of the latest corporate governance regulations and IFRS adoption almost certainly impact firm performance markedly. Second, corporate governance regulations should recognize the role of more frequent board meetings and more concentrated ownership in enhancing corporate performance. Third, stakeholders should apply pressure on investee firms to maintain smaller boards, engage genuinely independent directors, separate the role of Chairman and CEO, and maintain smaller audit committees with fewer and more effective meetings. The results should help corporate boards when deciding on the best corporate governance mechanisms to enhance firm performance. Further, the study should provide policy makers with a better understanding of the corporate governance structures required to promote better performance by drawing on existing theories and the empirical modelling, in an emerging economy setting such as Saudi Arabia, a new and broader data set, thereby informing better future policy and protecting shareholders’ interests.

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“…The focus on the moderating role of ownership concentration on board composition-bank performance relationship in Saudi banking sectors is motivated by several reasons. First, this study is encouraged by the call of Almoneef and Samontaray (2019), Dalwai et al (2015), and Leung et al (2014) for further research on the relationship between corporate governance and performance, and potential factors, such as ownership concentration that could moderate this relationship in banking sector of Saudi Arabia and Gulf Cooperation Council (GCC) countries.…”

Section: Introductionmentioning

confidence: 99%

The Moderating Role of Ownership Concentration on the Relationship between Board Composition and Saudi Bank Performance

Habtoor¹

2020

JAFEB

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The main purpose of this study is to investigate the potential effect of ownership concentration on the relationship between board composition and bank performance. The study employs a sample of Saudi banks listed on Saudi stock exchange (TADAUWL) over the period from 2011 to 2018. To test the study hypotheses and control for endogeneity issues, the Ordinary Least Square (OLS) and the Two-Stage Least Squares (2SLS) techniques are used. The empirical results reveal a significant negative moderating effect of ownership concentration on the association between board composition and bank performance, which confirms the study argument and supports hypotheses. The results indicate that board composition in terms of independent board members, executive board members, and non-executive board members in banks with higher ownership concentration have a weaker positive influence on bank performance. For control variables, the results are almost consistent with theoretical perspectives and previous empirical evidence. The results of this study have important implications for regulatory authorities, companies, and market participants in Saudi Arabia and countries with high concentrated ownership to understand how ownership concentration could affect corporate governance and firm performance and to identify appropriate actions to protect board composition from the influence of ownership concentration.

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Corporate governance and firm performance in the Saudi banking industry

Cited by 43 publications

References 19 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 Mechanisms and Firm Performance in Saudi Arabia

The Moderating Role of Ownership Concentration on the Relationship between Board Composition and Saudi Bank Performance

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