Saudi Cultural Missions Theses & Dissertations

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    The Effect of Board of Directors’ Characteristics on the Dividend Policy for US Listed Firms
    (Cardiff University, 2024-09-05) Alomirah, Afnan Abdulrahman; Ojra, Jafar
    The purpose of this study is to examine whether the board of directors' characteristics impact dividend policy using a sample of US listed firms. This study uses two dividend policy measures (dividend payment declaration and dividend yield) and two main regressions (Logistic and Tobit regressions) to test the extent to which firms’ board size, gender diversity, board independence, age of directors, board meeting frequency and CEO duality have an effect the dividend payout policy after controlling for firm size, leverage, profitability, cash flow, and investment and future growth. Additionally, this study uses random effect Logistic and Tobit regressions to validate the study’s outcomes. Based on a sample of 398 non-financial and non-utility US firms listed on the Standard and Poor’s 500 index for the period 2012 to 2022, it was found that dividend policy is positively affected by gender diversity, while board size, independence, age, meeting frequency and CEO duality had shown mixed findings. The results suggest that firms tend to pay higher dividends with the presence of female directors on the board, which is also consistent with the outcome theory that states that female directors tend to utilise dividends as a monitoring tool to mitigate agency costs and ensure the protection of shareholders’ rights.
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    Do Expertise in Audit Committees Impact Audit Quality? Evidence from Saudi Arabia
    (Durham University, 2024-09-06) Alahmadi, Ammar; Chaudhry, Ghafran
    This dissertation investigates the impact of audit committee (AC) characteristics on audit quality (AQ), using audit fees as a proxy, within the context of Saudi Arabia’s top 100 publicly listed firms in 2023. The study is motivated by the increasing focus on corporate governance (CG) reforms, driven by a series of high-profile corporate failures globally and the evolving regulatory landscape in Saudi Arabia, particularly under Vision 2030, which aims to enhance transparency and governance standards and attract international investment. The primary aim of this research is to assess the influence of financial expertise within ACs on AQ, further distinguishing between accounting and non-accounting expertise, and to examine the impact of AC members holding multiple directorships. Using a quantitative approach, the study employs ordinary least squares (OLS) regression analysis to evaluate the relationship between AC characteristics and AQ, with data manually collected from the Tadawul Saudi Exchange Stock website, annual reports, and financial statements. The findings reveal a significant positive impact of AC financial expertise on AQ, as evidenced by higher audit fees. However, when expertise is segregated into accounting and non-accounting categories, neither type significantly impacts AQ, suggesting that the combined presence of diverse expertise enhances AQ more effectively. Furthermore, AC members holding multiple directorships also show a significant positive correlation with audit fees, indicating their broader governance experience contributes to more rigorous audit processes. This dissertation contributes to the literature by providing empirical evidence from an emerging market, highlighting the distinct roles of various types of expertise within ACs and introducing audit fees as a proxy for AQ in Saudi Arabia—a novel approach that diverges from traditional proxies such as earnings management and audit firm type. The findings have practical implications for regulators, policymakers, and firms seeking to enhance CG structures, aligning with Vision 2030’s goals of fostering international confidence and bolstering economic diversification through improved governance practices.
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    Corporate Governance and Comply or explain approach in the UK: evolution, impact, and limitations
    (Brunel, 2024-09-08) alshuwaier, Mohammed Ahmed; Zaccaria, Elena
    The UK corporate governance codes date back to the late 20th century. Their beginning is marked by the adoption of the comply or explain approach, which revolutionised corporate governance by giving the codes voluntary character. This approach provides that companies have the flexibility to choose between strict adherence to the code or the provision of justifiable explanations in case of deviations. Thus, comply or explain resulted in a departure from the rigid hard law instruments to regulate corporate governance and was a step forward for the development of internal structures for audit and control. What this study aims to answer is whether the comply or explain has a place in the present corporate governance practice and how it has contributed as a corporate governance approach in the last thirty years. Thus, a conclusion was reached that this principle has both positive and negative features; however, its place in the UK’s corporate governance practice remains crucial for providing guidance on corporate conduct. This study found that the UK corporate governance codes are prominent with their flexibility, accountability and transparency resulting from the application of comply or explain. Consequent to the adoption of this principle, a more dynamic and adaptable corporate governance landscape was formed. Companies are now encouraged to tailor the rules so that they fit their needs, since companies differ dramatically in size, functions, and economic place. This choice between compliance or explanation allowed companies to experiment and innovate, which in turn led to diverse and effective corporate governance practices. Simultaneously, this approach also required clear explanations in case of noncompliance, which fostered accountability and transparency within the company. However, the comply or explain is is not without its downsides. The most detrimental among them is the heavy reliance upon shareholders’ engagement since the latter are the ones responsible for evaluating the quality of explanations given by executive directors. Additionally, it was found that companies provide only formal compliance, as their ‘tick-thebox’ mentality does not allow them to apply the spirit of the voluntary recommendations rather than the text itself. Thus, the reflexivity of the process is under question.
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    The Role of Corporate Governance for SOEs in Contributing to Achieving the Country's Objectives: Evidence from Saudi Arabia
    (Loughborough University, 2024-09-17) Alkharashi, Nawaf; Schnyder, Gerhard
    The importance that the corporate governance of SOEs has when it comes to their contribution to the development of an economy is hinged on the fact that proper corporate governance positions SOEs to contribute positively to the efficiency and competitiveness of an economy. The research aims to critically assess the role of corporate governance in enabling State-Owned Enterprises (SOEs) to contribute to the achievement of a country’s goals, using the Saudi Vision 2030 as a case study. In this research, a qualitative research method is adopted, and the case study research approach is employed in this research. In line with the qualitative research method and the case study approach, data was collected using interviews, particularly semi-structured interviews. A thematic analysis approach was employed in analysing the data collected from the interview. In the interview conducted, a total of 12 participants were interviewed. The data analysed points to the fact that the strategic alignment of the corporate governance of SOEs with national objectives is facilitated by the role of PIF and government entities, decision-making, oversights, as well as monitoring and evaluation mechanisms in the SOEs. The findings from the research show that while there are both internal and external factors that threaten the ability of SOEs to contribute to national goals such as the Saudi Vision 2030, adaptability and flexibility of corporate governance structures play a role in helping the SOEs to navigate these challenges successfully, while active stakeholder engagement, performance evaluation mechanisms, as well as transparency and accountability all play roles in supporting the SOEs in ensuring their corporate governance strategies and activities align them with the Saudi Vision 2030.
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    An Empirical Investigation Into the Challenges and Obstacles of Implementing Effective Corporate Governance in Saudi State-Owned Enterprises
    (Cardiff University, 2024-03) Almahmood, Labeid; Karbhari, Yusuf
    Corporate Governance (CG) research has received significant attention in developed countries like the UK and the US, yet its exploration within state-owned enterprises (SOEs) in emerging economies remains relatively nascent. This research investigates the challenges and obstacles surrounding the implementation of effective CG in Saudi Arabian SOEs. Employing an exploratory research design, this study combines qualitative and quantitative approaches through comprehensive semi-structured interviews (N=40) and a questionnaire survey (N=157) with board of directors’ members, senior finance officials, other senior managers, and internal and external auditors. The findings delineate various challenges related to CG in Saudi Arabian SOEs. Notably, SOEs often lack fair policies and procedures for board nominations, resulting in political agendas infiltrating the process. Particularly, inadequate autonomy granted to SOEs exacerbates governance difficulties. Government domination of board directorships and scant independent director representation, as well as board members’ time constraints (due to concurrent government or private sector roles), further hinder board competence. The inadequate connection between board member compensation and social objectives also raises concerns regarding the integration of board compensation structures with the hybrid nature of SOEs operations. Institutional deficiencies such as the absence of a robust regulator further hamper the implementation of CG practices. This study also finds that the role of the Saudi Arabian General Court of Audit (GCA) and external auditors in SOEs governance is minimal, and disclosure practices primarily adhere to regulatory requirements, limiting voluntary disclosures. Intriguingly, internal audit functions suffer from resource deficiencies, reporting discrepancies, and routine audit practices that lack risk considerations, all of which undermine effective CG implementation. Senior managers also encounter constraints on operational autonomy, often viewing their positions as transient, whereas compensation structures fail to align closely with long-term objectives. Overall, this study makes several theoretical contributions to our understanding of CG in Saudi Arabian SOEs. Firstly, it illustrates how CG practices are sometimes adopted more for legitimacy purposes or coercive pressures rather than for their practical applicability. Employing Social Identity Theory, this study also highlights how board members’ self-perceptions as disparate groups hamper effective governance implementation. From an Agency Theory perspective, this research demonstrates that SOEs face the dilemma that increasing autonomy can amplify agency conflicts while reducing interference. It also critically examines the role of independent directors, finding that, despite their structural presence, they frequently face difficulties in voicing opposition or providing constructive criticism. Additionally, contrary to the assumptions of Stewardship Theory, the study observes that executives often view their roles not as stewards of the organisation but as stepping stones to further their careers in either the public or private sectors. This, indeed, underscores a critical gap between theoretical expectations and practical behaviours. Finally, the study offers critical insights and actionable recommendations for policymakers to bridge the gap between theoretical frameworks and practical implementation to improve CG practices in Saudi Arabian SOEs.
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    The Impact of Corporate Governance on Financial Performance in Saudi Listed Companies
    (University of Sussex, 2024-09) Madini, Numair; Madini, Numair
    This dissertation investigates the impact of corporate governance on the financial performance of Saudi-listed companies, focusing on key governance elements such as board independence, executive compensation, audit committee effectiveness, transparency, and internal controls. With Saudi Arabia's Vision 2030 serving as a backdrop, this study aims to understand how recent governance reforms and practices contribute to the financial outcomes of companies in a rapidly evolving economic environment. The research adopts a quantitative approach, analyzing data from a representative sample of Saudi-listed firms across various sectors. The findings reveal that robust corporate governance practices are strongly correlated with improved financial performance. Specifically, the presence of independent directors on company boards is associated with higher returns on equity and assets, underscoring the importance of unbiased oversight in corporate governance. Similarly, executive compensation that aligns with company performance positively influences long-term financial success, although the design of such compensation packages must carefully balance short-term and long-term incentives. Effective audit committees, characterized by their independence and financial expertise, play a critical role in ensuring the integrity of financial reporting and internal controls. The study also highlights the importance of transparency in financial reporting, with companies that adhere to stringent disclosure practices attracting more investment and enjoying lower capital costs. Additionally, strong internal controls and proactive risk management practices are essential for 2 maintaining financial stability and resilience in an increasingly complex and volatile business environment. The dissertation concludes that as Saudi Arabia continues to pursue its Vision 2030 goals, the adoption of global best practices in corporate governance will be crucial in achieving sustainable growth, attracting foreign investment, and ensuring the long-term success of its corporate sector. The findings provide valuable insights for corporate leaders, policymakers, and researchers, contributing to the ongoing development of corporate governance practices in Saudi Arabia and other emerging markets.
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    Can Investigative Accounting Improve Corporate Governance and Ethics
    (University of Sussex, 2024-09) Alshehri, Arwa Amer; Xiong, Xi
    As Saudi Arabia continues to work towards the realization of vision 2030 initiatives and strategies, effective corporate transparency and ethical practices have become crucial. Investigative accounting, which is mainly forensic accounting, plays an important role in improving corporate governance by revealing fraudulent actions. Nevertheless, there is a dearth of studies that examined the influence of the internet on governance in Saudi Arabia in particular. This research seeks to establish the level of correlation that exists between investigative accounting practices, corporate governance and ethics in Saudi Arabia’s listed firms. This paper’s research design is quantitative where survey with structured questions were conducted with accounting professionals in Saudi listed companies. The data collected were analyzed using SPSS to test the hypothesis on the link between investigative accounting practices and corporate governance performance. The results highlight the link between investigative accounting and improved corporate governance and ethics, explaining the place of these methods in curbing fraud and promoting fairness. The role of investigative accounting in the Saudi Arabia’s context is emphasized in the study along with the suggestion to apply it to enhance the governance framework of the country in line with the best practices existing in the world.
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    The firm-level impact of corporate governance mechanisms on firm performance of listed non-financial companies in Saudi Arabia.
    (universaty of Liverpool, 2024-09) Aljebreen, Sultan; Abuzeid, Mostafa
    There has been increased focus on desirable corporate governance practices linked with improved performance and firm stability. Therefore, this study sought to explore the influence of board factors as the determinants of the firm’s performance. Corporate governance mechanisms included board composition, audit committee features, and ownership, while profitability measured firm performance. The dissertation employed a quantitative research approach, and panel data was compiled from the Tadawul (Saudi Stock Exchange) for the period 2020-2023. Panel regression analysis was used to examine the relationship between corporate governance mechanisms and firm performance. The research results imply that the board of directors size has a significant positive influence on a firm’s performance, which could suggest that a large board, which in most cases differs in skills and experience, helps in developing strategic decisions that can enhance financial performance. On the other hand, CEO duality, meaning that the CEO is the same as the board chairman, was discovered as having a marginally negative influence on performance. This could be an indication of the problems with excessive concentration of power, hence diminishing the independence and efficacy of the board. Although other governance factors, including audit committee characteristics and ownership structure, were examined, they were not significantly linked to firm performance. Therefore, there may be a need for further studies to validate their influence on the relationship between corporate governance and financial performance in Saudi Arabia. Overall, the study offers significant insights to policymakers and corporate leaders in developing best practices for improving corporate governance in Saudi Arabia.
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    Impact of the Audit Committee’s Characteristics on Enterprise Risk Management, Internal Audit, External Audit and Firm Performance in Saudi Arabia
    (RMIT University, 2024-02-07) Almodawi, Abdulkareem; Safari, Maryam; Yapa, Prem
    Highly visible corporate collapses in the early twenty-first century, such as those experienced by Enron and WorldCom in the United States, as well as OneTel and Harris Scarfe in Australia, were the catalysts for a simultaneous decline in investor confidence (Robins 2006). Concerns regarding the ideal composition of corporate boards and their committees have become more pronounced among various stakeholders, including investors, scholars, practitioners, and global regulatory bodies. This increased level of scrutiny aims to ensure effective decision-making processes and the creation of value (Kim et al. 2014; Masulis et al. 2012). In the broader discussion on board composition and its committees, a notable aspect that has emerged is board diversity (Bernile et al. 2018). One of the primary justifications for emphasizing board members' diversity is to advance social justice principles (Van Dijk et al. 2012). Nevertheless, scholars and governing bodies have also put forth arguments grounded in the realm of economics. To illustrate, the presence of a varied collection of individuals within a specific group can counteract the occurrence of 'groupthink', a phenomenon associated with the Enron collapse (O'Connor 2002) and the Volkswagen emission problems (Glebovskiy 2019). Analyzing this matter through a lens of reliance on resources (Salancik and Pfeffer 1978), diversity expands the array of skills, capabilities, and expertise that a board and its committees can access. One important facet of corporate governance is the audit committee (AC), which oversees internal and external auditing and enterprise risk management. The enactment of the US Sarbanes-Oxley Act of 2002 brought about more stringent requirements regarding the AC's independence. Consequently, there was a decrease in the traditional ties between the board of directors and their committees or with executive management (CEOs). Nonetheless, in organizations where audit committees witnessed a reduction in members who had established ties to the CEO, approximately 24% of these vacancies were filled by individuals who possessed social affiliations. This emerging pattern raises concerns regarding the escalating significance of these informal associations within AC as an alternative, unregulated channel through which influence may be exerted on the AC's activities (Hwang and Kim, 2012). Bernile et al. (2018) Chen et al. (2017) found that diversity in the board of directors and its committees positively impacts the companies and reduces the agency problem. In Saudi Arabia, customary practices privilege familial and friendly relationships, which subsequently could impact an organizations' operational mechanisms (Common 2013). The bestowal and receipt of ‘wasta’ (roughly translated as nepotism) occurrs within networks of extended kinship and frameworks of organizations. Saudi Arabian managers exist within a cultural milieu in which social and professional ties assume significant and influential roles in institutional and group dynamics. Besides tribal, clan, and family loyalties, religion is the primary authority source in Saudi Arabia (Nevo 1998). The Muslim world is a society characterized by deep-rooted conflicts surrounding the notions of patriotism and territoriality (Nevo 1998). It is deemed that in all Arab nations, Wasta is deeply ingrained in the culture and influences every choice (Cunningham and Sarayrah 1993). Several academics have written about the Wasta phenomenon in Arab nations in the last ten years (Alenzi 2017; Alreshoodi 2016; Barnett et al. 2013; Cunningham and Sarayrah 1993; Harbi et al. 2017; Hutchings and Weir 2006; Tlaiss and Kauser 2011). According to Hutchings and Weir (2006), Wasta may be of utmost relevance regardless of an organization's objectives and track record. Strong social bonds have been established in Saudi Arabia through personal relationships and family status. Wasta access has a direct bearing on the hiring and advancement of individuals who have strong ties to their families (Alreshoodi 2016). This study aims to examine the impact of Saudi's unique socio-cultural relationships (social ties), namely regionalism and tribalism, kinship, and wasta, and professional ties among AC members on AC responsibilities (ERM, IA, EA) and then the impact of AC performance on firm performance. The researcher presents the perspectives, opinions, and experiences of AC members regarding their social and professional ties and how they affect AC performance. Then, the researcher considers how AC performance affects firm performance (FP). The study employs a mixed methodology of semi-structured interviews and surveys. This study contributes to the knowledge and literature on audit committees and corporate governance. It may have implications for policymakers, regulators and other government and business officials responsible for corporate governance and its implementation in Saudi Arabia. The findings indicate that pre-existing social ties among AC members, as opposed to a merit-based selection procedure, have a negative effect on AC performance. In contrast, professional ties have a positive impact on AC performance. Moreover, AC performance has a significant positive effect on firm performance. The findings provide insights into social and professional networks among AC members in Saudi Arabia. The most common ties among members are found to be professional and Wasta ties in the first place, then regionalism. Family ties follow this, and the last place is tribalism. Moreover, the findings uncovered that these social and professional ties are exclusive among AC members and extend to members of the company's board of directors and major investors. The analyses revealed that professional ties among members make them perform their duties professionally. In contrast, family relations and tribe relations negatively impact ACA, mainly because of social compliments among them. The regionalism among members is noticeable; most participants prefer sharing the same region among members. Furthermore, the critical reasons behind using social and professional ties among members were found to be trust and loyalty, merit: expertise, qualifications and experience, Legal loopholes, lack of databases for choosing a new member recruitment procedure, increased job satisfaction, financial benefits, pressure from society on members/chairs and control over the committee. Also, Family, Region, Tribe, and Wasta have a significant negative indirect effect on Firm Performance through (ACA). In contrast, professional ties significantly positively and indirectly affected Firm Performance through ACA. This study addresses the gaps in the literature concerning Social and professional ties within AC and, Their effect on ACA and then firm performance. To the researcher’s knowledge, this is the first project that brings the issue of socio-cultural relationships to corporate governance studies and explores the implications of such ties on ACA.
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    THE EFFECTS OF CEO GREEDINESS AND PEER COMPENSATION ON THE QUALITY OF FIRMS’ FINANCIAL INFORMATION
    (The University of Nottingham, 2024-04-03) Alhossini, Abdullah A.; Kim, Ja Ryong; Nguyen, Huy Nguyen
    Given the severe consequences of low-quality financial information from firms—such as eroding investor trust and even triggering financial crises—its determinants have drawn significant attention from regulators, investors, and researchers. Nevertheless, serious oversights prevail in the accounting literature, particularly concerning greedy CEOs, who harbor intense desires for extraordinary material wealth at others’ expense, jeopardize firms’ sustainability, and even contributed to recent financial scandals. Specifically, despite their various social and organizational implications, the effects of CEO greediness on the quality of firms’ financial information have been neglected. The current thesis, however, fills this gap in the existing literature by investigating both the separate then the integrated impacts of CEO greediness along with CEO compensation at peer firms on financial information quality. First, using a 1992–2019 U.S. sample with 23,837 firm-year observations and three proxies for measuring CEO greediness, the research findings demonstrate a positive association between CEO greediness and the extensive use of earnings management, ranging from accrual-based earnings management, real earnings management, and classification shifting to opportunistic non-GAAP earnings disclosure. These findings highlight the multifaceted approach to earnings management that greedy CEOs employ. Moreover, the research finds that external auditors charge higher fees to and are more likely to resign from clients with greedy CEOs, indicating auditors’ perceived risk of CEO greediness on financial information quality. When comparing changes in earnings management practices and auditors' decisions around CEO transitions—where incoming and outgoing CEOs exhibit varying levels of greediness—it reinforces the study's conclusion that CEO greediness adversely affects the quality of a firm's financial information. Next, investigating the influences of peer firms’ CEO compensation on a firm’s financial information quality, this study—using a text-based measure to identify peer firms and a consequent 1992–2019 sample of 23,371 observations—finds a negative association between peer firms’ CEO compensation and a firm’s financial information quality, as measured by accrual-based and real earnings management, classification shifting, and non-GAAP earnings. The findings also show a positive relationship between peers’ CEO compensation and both external audit fees and auditor resignations. Finally, examining the moderating role CEO greediness plays in the peer compensation-information quality nexus, this study finds that CEO greediness exacerbates the above negative association and renders the above positive relationships more pronounced. Overall, the findings suggest that as peers' CEO compensation rises, the focal CEO is more likely to employ varied earnings management strategies to boost their personal gains, with CEO greediness significantly intensifying this relationship. The research contributes to the literature on CEO greediness, compensation, and financial information quality. The findings emphasize the significant role of CEO greediness and peers’ CEO compensation in shaping the quality of firms' financial information, providing valuable insights for shareholders, regulators, and broader corporate governance. Theoretically, the research emphasizes the notion that CEO personality traits interact with economic incentives they face to affect CEO decisions, thereby further enhancing understanding of the variations in behavioral responses to incentives such as peer compensation. Methodologically, the study integrates four dominant measures of earnings management to capture a holistic picture of information quality while also considering auditors' perspectives, thereby expanding the extant literature’s narrow focus on limited measures, despite the potential substitute nature intrinsic to these measures.
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