Saudi Cultural Missions Theses & Dissertations
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Item Restricted Corporate governance in the insurance industry: Global evidence on risk-taking and performance(University of Southampton, 2024) Alzughaibi, Faris; Tingbani, Ishmael - Haque, FaizulThe insurance industry plays a pivotal role in maintaining both domestic and international economic stability, making the governance of insurance companies and the mechanisms influencing their operations and performance crucial areas of academic and practical interest. This thesis aims to expand the existing body of knowledge on the role of corporate governance (CG) in the insurance industry from a global perspective through three distinct but interconnected papers. The first paper presents a comprehensive systematic literature review (SLR) on the effects of CG in the insurance industry. It appraises, synthesises and extends knowledge on the theoretical perspectives and empirical evidence regarding internal and external governance mechanisms and their impacts on a wide range of financial and non-financial outcomes for insurance firms. This review, encompassing 130 articles published in 63 journals from 1980 to 2021, reveals several key findings: (a) agency theory is the most commonly applied theory, with a lack of application of multi-theoretical frameworks; (b) certain internal governance mechanisms, such as state, family and foreign ownership, board diversity, finance and Shariah committees and debt-based compensation, are rarely investigated; (c) external governance mechanisms, such as Shariah law and external actuaries, receive limited attention; (d) cross-country studies are scarce; and (e) methodological limitations include a scarcity of qualitative studies, inconsistency and lack of precision in certain variable measurements. The paper concludes by outlining several opportunities for future research. Building on insights from the SLR, the second paper investigates the influence of multiple facets of board diversity (i.e., gender, nationality, tenure and age) on two critical aspects of risk-taking in insurance firms: insolvency risk (financial risk) and underwriting risk (operational risk). Using an international sample of 3,333 firm-years from publicly traded insurers across 44 countries over 2003–2019, the paper finds that board diversity in terms of gender, nationality and age significantly reduces both insolvency and underwriting risk. However, board tenure diversity shows mixed results, with a negative association with insolvency risk but a positive association with underwriting risk. Further analysis uncovers the mechanisms through which diverse boards influence risk management, demonstrating that they tend to adopt more conservative investment and financial policies. Yet importantly, this conservative approach does not compromise financial returns. Additionally, the implementation of gender quotas leads to a significant reduction in insurer risk. The third paper completes the picture of how board diversity affects risk-taking by considering the moderating role of institutional factors and adopting a holistic view of diversity through a composite board diversity index encompassing gender, nationality, tenure, and age. Using a global dataset of 3,187 firm-year observations from publicly listed insurers over a 17-year period, the findings confirm that increased board diversity is associated with reduced insolvency and underwriting risk among insurance firms. The paper further reveals significant moderating effects of institutional factors on this relationship. Specifically, strong national governance quality amplifies the risk-mitigating benefits of board diversity. Moreover, drawing on Hofstede’s (1980) cultural dimensions, the paper demonstrates that societies with high uncertainty avoidance strengthen the risk-reducing effects of board diversity, while cultures characterised by high individualism, power distance, and masculinity attenuate these benefits. Additional analyses focused on the global financial crisis (2007-2009) reveal that the effectiveness of diverse boards in mitigating risk is especially pronounced during periods of economic stress.31 0Item Restricted Continuous Evaluation of the Two-Strikes Rule: Long-Term and Spill-Over Effects(Curtin University, 2024-04) Babkair, Fawaz; Sing, Harjinder; Sultana, Nigar; Makarem, NaserThis thesis presents three essays that have a shared objective, which is to evaluate the impact of introducing and implementing the two-strikes rule in Australia. The failure to remunerate chief executive officers (CEOs) appropriately caused a series of corporate collapses in the early twenty-first century and led to the global financial crisis (GFC) in 2007. As a result of regulators’ efforts, since 2011, shareholders have been able to participate in the setting of remuneration under the two-strikes rule. According to this rule, non-executive directors may stand for re-election if 25% of shareholders vote against the remuneration report in two consecutive years. This unique mechanism renders this rule more controversial than the remuneration of CEOs. Concerns about remuneration practices persistently appear in the financial press, independent organisation reports and empirical studies which consistently indicate a rise in CEO remuneration. Moreover, concerns have been raised regarding the ability of shareholders to vote appropriately. In this situation, the response of boards on behalf of shareholders results in unfair remuneration settings from the CEOs’ perspective, thereby adding more pressure on CEOs. Therefore, the first essay aims to test whether the two-strikes rule is able to effectively curb the increase in CEO remuneration and whether it can bring about positive changes in the remuneration structures of CEOs in the long-term. It also identifies the reasons for the high levels of dissent and the resulting strikes. The second essay aims to investigate CEOs’ proactive response strategies in terms of earnings management following the introduction of the rule. The third essay aims to investigate CEOs’ reactive response strategies after experiencing a high level of dissent. This thesis contributes to the existing body of research literature by responding to the concerns regarding the increase in remuneration and shareholder voting behaviour and by exploring the relationship between the implementation of the two-strikes rule and earnings management. Chapter One presents the background information and motivation for this thesis. It also summarises the results of the three essays and their contributions to the existing body of knowledge. Chapter Two identifies the direct impact of the two-strikes rule on the level and structure of CEO remuneration as well as determining the shareholder vote. The descriptive and univariate analyses indicate that the two-strikes rule effectively reins in increases in CEO remuneration and also brings about changes the remuneration structure. During 2019, total CEO remuneration and cash bonuses were at their lowest levels since 2007 and 2004, respectively, but equity-based pay as a proportion of total remuneration was at its highest level across 16 years. With regards to voting results, shareholders are more inclined to object to remuneration reports when CEOs receive high levels of remuneration, when firms have poorly structured corporate governance and when firms’ performance is unsatisfactory. In addition, shareholder dissent is significantly greater under the two-strikes rule than that under the Corporate Law Economics Reform Program 9 (CLERP9), especially in sectors experiencing significant increases in remuneration. Therefore, the findings do not suggest any further regulatory reforms regarding CEO remuneration in Australia at this time. However, the findings should motivate countries facing CEO remuneration increase to adopt the two-strikes rule. Chapter Three aims to identify the impact that the introduction of the two-strikes rule had on CEOs’ earnings management activities. The results indicate that CEOs shifted away from accrual-based earnings management to real earnings management, which is most obvious when the proportion of a CEO’s bonus paid in cash is high. However, CEOs with high equity-based remuneration and high total remuneration have been cautious about engaging in earnings management activities since the rule’s passage. Also, a good corporate governance structure would prevent CEOs from shifting to real earnings management. Therefore, legislators should not neglect the continuous strengthening of corporate governance, especially when shareholders have a role in determining remuneration. Additionally, board members should be cautious about rewarding CEOs with cash bonuses in these circumstances and instead replace them with equity-based remuneration. Chapter Four examines the relationship between shareholder voting outcomes and CEO earnings management activities in the subsequent year. The findings indicate that shareholder dissent is positively associated with accrual-based and real earnings management in the following year. This association is most apparent when CEOs receive significant cash bonuses. However, CEOs receiving high equity-based remuneration have been cautious about engaging in earnings management activities post-dissent. Nevertheless, a shift from accrual-based to real earnings management can be observed among CEOs receiving a high level of total remuneration. This shift tends to be favoured by boards that are gender diverse and have long tenures. However, active boards, as proxied by the number of board meetings, constrain only accrual-based earnings management, and large boards fail to restrain real earnings management after facing dissent. The accounting expertise of directors and independent directors enhance financial reporting monitoring because they have the ability to mitigate both forms of earnings management. Regulatory and supervisory authorities must be discerning regarding shareholders' dissent to remuneration reports, even if this opposition does not lead to registering a strike. The Board of Directors should ensure that CEO remuneration structures consist of a small proportion of cash bonuses versus a large proportion of share-based remuneration. Chapter Five presents the conclusion, along with the limitations of this thesis and directions for future studies.33 0Item Restricted Gender diversity on corporate board and its influence on dividend payouts. An empirical study of FTSE 350 non-financial UK firms from 2010 to 2022(Saudi Digital Libaray, 2023-12-01) Alatni, Rehab; Lei, ZichengThis study investigates the relationship between board gender diversity and dividend payouts among 215 non-financial firms listed on the UK FTSE 350 Index from 2010 to 2022. Using the fixed effect model and generalised least squares random effect model (GLS), splitting the sample into high and low independent directors and applying a one-year lagged effect for all independent variables, the results revealed a significantly positive relationship between the presence of female directors and the likelihood of distributing dividends. However, this relationship yields divergent results during the Covid-19 pandemic (2020–2022). This study is the first to examine the relationship between board gender diversity and dividend payouts within non-financial FTSE 350 firms and to provide insight into this relationship during the Covid-19 pandemic. This study focused on all female directors, irrespective of their type of directorship. Moreover, based on Covid-19 sample period, it failed to determine the relationship, highlighting a need for further examination.14 0Item Restricted Interpersonal Family Dynamics and Corporate Governance in Saudi SMEs: Implications for Business and Family(Saudi Digital Library, 2023-11-28) Alnahdi, Abdulrhman; Calvard, TomThis research sheds light on the influence of family dynamics on businesses, exploring how both conflicted and harmonised relationships impact both the company and the family. Additionally, it delves into the role of corporate governance (CG) practices as potential solutions for family businesses to adeptly manage and sustain their firm's performance. This research addresses the gap in understanding how family dynamics within small and medium-sized enterprises (SMEs) influence business practices in Saudi Arabia. A qualitative semi-structured interview method was employed to collect research data, which was subsequently subjected to processing using thematic analysis through the lens of a social constructivist perspective and analysed using an interpretive approach. The findings reveal that conflicted relationships negatively impact business performance, particularly emerging during the transition from the first to the second generation and the retirement of the initial generation. This transformation from harmonised relationships to conflict is often attributed to excessive family involvement in the business. Additionally, certain findings point to the phenomenon of over-controlling behaviour by the first generation, which is influenced by societal norms. A newly emerging theme in this research pertains to the adverse effects of regulatory shifts stemming from implementing Saudi Vision 2030 plans on family businesses. This paper provides practical implications for family business owners, governmental bodies, and future research areas for academics and consultants, aiming to enhance our understanding of family dynamics within one of the prominent countries in the Middle East.19 0Item Restricted Understanding Directors' Duties in the Legal Systems of Saudi Arabia and the United Kingdom: A Comparative Study of Corporate Governance Systems.(Saudi Digital Library, 2023-09-01) Alajaji, Abdullah Mohammed S; Lin, WangweiAbstract: This dissertation compares the new Saudi Companies Law director obligations to the UK Companies Act 2006. The study is driven by the Saudi government's efforts to attract international investment and boost the private sector's economic influence. The Saudi Companies Law is compared to the UK Companies Act due to UK legislation's historical impact on company governance and the similarity of directors' obligations in both nations. A detailed literature analysis explores the historical evolution of corporate governance in Saudi Arabia and the UK, covering significant events, legislative reforms, and regulatory measures. This study analyses legal and regulatory environments to identify directors' distinctive tasks and responsibilities in each country, providing insights into the history and logic behind their roles. Stakeholder theory, which recognises organisations' more significant responsibility beyond shareholder value maximisation, is also explored in the dissertation. The research uses stakeholder theory to examine directors' duties to stakeholders and their effects on corporate decision-making. Enlightened shareholder value emphasises sustainable long-term value generation for shareholders over short-term benefits. The paper examines how this idea corresponds with directors' obligations in Saudi Arabia and the UK, emphasising the need for directors to consider long-term interests and company sustainability. Chapter 4's comparative study is the research's core. It compares and contrasts each nation's legislative frameworks for directors' obligations. The research seeks to clarify directors' roles in supporting good governance by assessing the regulatory frameworks' efficacy and suitability. In addition to explaining the reasons that made the Saudi government add the business judgment rule in the new company law. This research aims to inform policymakers, regulators, and business stakeholders, especially in light of the new Saudi Companies Law. By comparing regulations in Saudi Arabia and the UK, this study provides a foundation for further research. It enhances the current discourse on corporate governance and board members' vital role in corporate success, transparency, and accountability.33 0Item Restricted Impact of Sustainability Reporting on Saudi-Listed Firms Performance under the Moderating Effect of Corporate Governance(Saudi Digital Library, 2023-07-14) Alhamami, Mahdi; Natoli, RiccardoWith the increasing preference for transparency in economic, environmental and social issues, sustainability reporting (SR) has become a broadly accepted practice for enterprises worldwide. Although SR is not a new concept, research focusing on the potential financial and non-financial benefits of SR is still limited, especially in the context of developing countries such as the Kingdom of Saudi Arabia (KSA). This research adopts a multi-theoretical perspective to examine how SR impacts corporate financial and non-financial performance. Since corporate governance (CG) is considered a potential method for improving SR transparency and efficacy, this research also investigates how specific CG mechanisms moderate this relationship. Although previous studies have examined SR and firm performance, they did not include a focus on Islamic items in SR. Additionally, the role of CG as a moderator in the relationship between SR and firm performance in the context of KSA remains unexplored. Therefore, the present research extends the literature by introducing a new framework through which to investigate CG mechanisms as moderating effects between SR and firm performance of KSA listed firms. This research adopted a quantitative approach and developed a modified global reporting initiative (GRI) disclosure index to collect secondary data through the manual content analysis technique from 121 listed firms. The present research also sourced the annual and sustainability reports for the data collection. The research’s variables included 1) the independent variables of total SR (TSR), economic SR (ECO), environmental SR (ENV) and social SR (SOC); 2) the dependent variable of financial performance, which is proxied by return on assets (ROA), return on equity (ROE) and Tobin’s Q (TQ), with non-financial performance being proxied by market share (MS) and internal business perspective (IBP); and 3) the moderating variable, which comprised the CG mechanisms of board size (BS), independent directors (ID), audit committee size (ACS), independence member of audit committee (IMAC), audit committee quality (ACQ), board gender diversity (BDG), government ownership (GOV) and foreign ownership (FOR). To test the research hypotheses, both univariate statistics (t-test) and fixed effect panel regression analysis were performed for two-panel datasets: 1) pre-COVID-19 (2015–2019, 596 firm–year observations and 2) including COVID-19 (2015–2020, 690 firm–year ii observations). Robustness testing was performed by employing the generalised method of moments (GMM) on the balanced panel data. The findings indicated that in KSA, the modified GRI index is more effective than the traditional GRI index. The research also found that SR and its three components (ECO, ENV, SOC) significantly and positively impact the financial performance indicators in the periods before COVID-19 and including COVID-19. Similarly, SR and its components demonstrated a positive significant relationship with non-financial performance in both data periods (pre and including COVID-19). Further, the findings associated with the moderating variables demonstrated that the CG mechanisms mostly did not moderate the nexus between SR and financial performance. Notably, GOV and ACQ demonstrated a significant moderating impact between SR and financial performance (ROA, ROE, TQ). The results further revealed that BS, ACS and GOV significantly affected SR and MS before COVID-19, while ID and BGD performed a similar role in the period including COVID-19. Similarly, the moderating variables BS and BGD were identified as significant moderators of SR on IBP both pre and including COVID-19. The results from this research offer insights for policymakers, practitioners and key stakeholders in KSA to achieve higher sustainability ratings and subsequently improve the financial and non-financial performance of listed firms. It also illuminates the moderating role of CG on the nexus of SR and firm performance. Practical and policy implications arising from this study include 1) strengthening the role of the board of directors; 2) highlighting the benefits of SR for profitability in KSA companies; 3) implementing comprehensive SR guidance and compliance for KSA listed firms; and 4) increasing the number of IDs, improving ACQ and encouraging the adoption of the International Financial Reporting Standards for effective SR.96 0