Relationship between Corporate Information Disclosure and Financial Performance in Saudi Arabia

Abstract

This study explains the influence of the corporate disclosure of firms listed on the Kingdom of Saudi Arabia’s stock exchange (Tadawul) on their subsequent financial performance. The research was conducted using an empirical-analytical approach at an explanatory level. Hypotheses were formulated based on secondary data and a general linear model that explains the financial performance measures based on the relevant corporate information disclosed by companies listed on Tadawul was used. Firms that disclosed the use of their strengths and resources to achieve objectives related to financial, economic, and environmental issues had a negative impact on the excess return expected beyond the systematic risk-adjusted return. Jensen’s alpha index was found to be the most appropriate financial performance measure to evaluate the relationship between corporate disclosure practices and firms’ subsequent performance. This study contributes to a better understanding of how the International Integrated Reporting Framework fosters value creation in financial capital. To the best of the author’s knowledge, this is the first study to use statistical procedures to explain the simultaneous effects of multiple explanatory variables on multiple explained variables, which constitutes a major methodological contribution.

Accounting Information Quality, Tax Avoidance and Companies' Performance: the Moderate Role of Political Connection

“…In this regard, several studies have investigated the effect of disclosure (Harun, 2021;Fong & Shek, 2009;Fajarini Sri Wahyuningrum & Djajadikerta, 2020), IFRs standards (Ofoegbu & Odoemelam, 2018), and transparency (Hassan Che Haat et al, 2008;Gani et al, 2021;Malau, 2019b) on companies' performance. In the Middle East and monarchy systems, the results of studies on corporate information disclosure and financial performance such as in Saudi Arabia (Al-dubai et al, 2021) show no effect of risk disclosure and risk management disclosure on firms' performance as supported by (Hariri, 2022). However, positive results are found in the same market (Elbarrad, 2014).…”