Saudi Cultural Missions Theses & Dissertations
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Item Restricted The Saudi Stock Market Reaction to, and Valuation of, IFRS Reconciliation Adjustments.(University of Dundee, 2025) Almutlaq, Abdullah; Fifield, Suzanne; Kourtzidis, StavrosA significant change in Saudi Arabia over the last decade was the mandatory adoption of International Financial Reporting Standards (IFRS). The conversion to reporting under IFRS required listed companies to publish reconciliation statements between the previous Saudi Generally Accepted Accounting Principles (S-GAAP) and IFRS, as mandated by IFRS 1. IFRS was established to meet the global economy's demand for high-quality and transparent financial reporting, and to harmonise financial reporting practices and address challenges from variations in accounting practices across different financial and legal systems, and cultures. The extant literature on IFRS adoption, market response, and value relevance has primarily concentrated on the European context. However, there is a need for research regarding IFRS adoption in Saudi Arabia. The country unique characteristics, such as its high reliance on oil revenue and its Vision 2030 initiative to diversify its economy underscore the need for adopting IFRS. Challenges like necessary changes to financial reporting systems and cultural barriers complicate this transition, which may impact market responses and the relevance of financial information. Consequently, this thesis seeks to fill this gap by examining (i) how the Saudi stock market responded to the release of IFRS reconciliation statements; and (ii) how the level of value relevance has developed over time. The aim of the current study is threefold. First, the study determines how market participants reacted to the mandatory adoption of IFRS, using a sample of 150 companies listed on the Saudi stock market during the period 2017 to 2019. Studies suggest that investors' perceptions of IFRS adoption are affected by their expectations of the future benefits and costs associated with IFRS adoption (Comprix et al., 2003; Daske et al., 2008; Armstrong et al., 2010; Joos and Leung, 2013). The findings show that the market reacted positively to IFRS adoption, suggesting that investors perceived it as being beneficial. However, for some sectors, the reaction to the publication of IFRS Reconciliation Statements was negative, and suggested that some information leakage may have occurred. Second, and building on the foundation established in the first empirical chapter, this thesis analyses the value relevance of IFRS using a sample of 105 listed companies for the three years before and after the adoption of IFRS in Saudi Arabia. The findings indicate that adopting IFRS enhanced the value relevance of accounting information, as demonstrated by an increase in explanatory power following the implementation. Third, the thesis examines the impact of IFRS adoption on accounting quality in Saudi Arabia by utilising three accounting quality models, using a comprehensive dataset of 101 listed firms over the period 2014 to 2020. The findings reveal that IFRS adoption improves certain aspects of accounting quality, including earnings persistence, and earnings smoothing. These results contribute to the ongoing discussion about the effects of IFRS adoption on financial markets and accounting practices in emerging economies. As such, the thesis offers valuable insights for policymakers, standard-setters, and financial statement users in Saudi Arabia and other developing countries that are considering similar regulatory changes. The findings of this study have important implications. They support Saudi Arabia's transition to IFRS, showing a positive stock market reaction that suggests investors see benefits in this adoption. This may encourage regulators to tailor standards to user needs. In addition, the stock market reaction may indicate how investors in other developing countries view IFRS modifications, offering insights for policymakers in similar economies. Finally, the thesis reveals that adopting IFRS in Saudi Arabia has enhanced certain aspects of accounting quality, indicating that the standards meet some objectives.7 0Item Restricted Towards an Understanding of Audit Quality(The University of Sheffield, 2024-07-27) Alobaid, Ali A.; Sikka, PremThis study explores perceptions of audit quality (AQ) and audit quality indicators (AQIs) in Saudi Arabia. AQ and AQIs are explored from the perspectives of external auditors, members serving on the boards of directors of Saudi listed companies (BoDs), and members of the Professional Practice and Quality Review Committee (PPQRC) of the Saudi Organisation of Chartered and Professional Accountants (SOCPA). This research focuses on how these stakeholders define AQ and AQIs, and how Western auditing practices have shaped perceptions of AQ and AQIs in the Saudi context. A mixed-methods research design is used to collect and analyse data. Data from a questionnaire issued to 200 participants are descriptively analysed and semi-structured interviews undertaken with 34 participants are thematically analysed. The findings reveal general shared perceptions of AQ among the participants, despite their different interests. The study finds that AQIs in Saudi Arabia are predominantly associated with the auditor and the audit firm, and Western auditing practices have a strong influence on perceptions. The International Financial Reporting Standards/International Auditing Standards (IFRS/ISAs) also shape perceptions of AQ and AQIs in the local environment. The study contributes on multiple levels. Theoretically, it provides a deeper understanding of AQ and AQIs in the Saudi context. Methodologically, it advances research by employing a mixed-methods design that integrates quantitative and qualitative approaches in the Saudi context. Empirically, it contributes in its field of research by exploring the role of Western auditing practices in shaping AQ and AQIs in Saudi Arabia. Practically, it provides insights for auditors, BoDs, and regulators for improving audit quality practices in Saudi Arabia. It also serves as a reference guide for future research within the Gulf Cooperation Council (GCC) and other developing countries. Keywords: audit quality, perceptions, indicators, Saudi Arabia, external auditors, Board of Directors, SOCPA, Western auditing practices, international standards, IFRS, ISA.15 0Item Restricted Corporate Social Responsibility Disclosure and Real Activities Earnings Management: The Interaction Impact of Corporate Governance and IFRS in Saudi Arabia(Saudi Digital Library, 2023-10-25) Alharbi, Khalid; Islam, SardarCorporate social responsibility disclosures (CSRD) have gained increased attention in business debate and practice, from businesses and stakeholders globally. Despite the increasing importance of CSRD, there are concerns about the purpose of these disclosures. These principally hinge on two perspectives: ethical and managerial opportunism. Ethically, the argument holds that participation in CSRD reduces opportunistic behaviour. In addition, CSRD reduces agency problems by providing an environment that decreases motivation to engage in earnings management practices. Managing earnings is the intentional alteration of an organisation’s external financial reporting. Managers who engage in earnings management practices may resort to CSRD to deflect stakeholder attention from their opportunistic actions, thereby protecting their positions. Previous studies that have examined the relationship between CSRD and real activities earnings management (RAEM) remain contested. Further, there is a lack of knowledge regarding CSRD practices in developing countries. In terms of earnings management, associated studies have primarily examined accrual-based earnings management with a limited focus on RAEM. Moreover, little research has been conducted on RAEM in Saudi Arabia. The interaction effect between International Financial Reporting Standards (IFRS) has yet to be explored. There has been limited investigation into the interaction between various components of internal corporate governance (e.g. board characteristics and audit committees) and the ownership structures on the relationship between CSRD and RAEM. The purpose of this research is to address the limitations in the current literature. This research investigated the impact of CSRD on RAEM, in addition to investigating IFRS, internal corporate governance and ownership structures on the RAEM, and their interaction on the relationship between CSRD and RAEM. Data for this research were derived from 704 observations from non-financial firms listed on the Saudi stock exchanges between 2013 and 2020. A balanced panel of data consisting of multiple observations over an eight-year period is utilised. To collect secondary data, two approaches were taken. First, study data were collected from the selected companies’ annual reports, which are available through DataStream. In the second approach, data were collected manually from annual reports available on the Saudi Arabian stock exchange (https://www.tadawul.com.sa). More specifically, the variables gathered manually from the annual reports are the CSRD, internal corporate governance and ownership structures. RAEM measures were calculated using a well-known evaluation model developed by Roychowdhury (2006) and the modified 2020 model by Cohen et al. (2020). This research develops the CSRD index by building 40 checklists. An ordinary least squares model with robust standard errors and an industry fixed effect were applied to all models in the study. The findings of this research reveal that CSRD and RAEM are significantly negatively associated. The researcher applies three approaches to address potential endogeneity issues: (i) an instrumental variable analysis (2SLS) technique, (ii) propensity score matching (PSM) and (iii) reverse causality. This research finds that the results are robust to endogeneity concerns. The researcher applies various robustness tests to provide evidence that CSRD firms are less likely to engage in RAEM practices. The results of IFRS with RAEM indicate that they are significantly positively related. The results of internal corporate governance (board size, presence of the royal family on the board and frequency of audit committee meetings) are negatively and significantly related to RAEM. Managerial ownership, institutional ownership, government ownership and family ownership are negatively significantly related to RAEM. It appears that RAEM practices were more constrained for CSRD firms during the pre-IFRS adoption period. The high presence of the various components of internal corporate governance strengthens the negative relationship between CSRD and RAEM practices, compared with the low presence of the same internal corporate governance components. The findings of this research indicate that the presence of managerial ownership, institutional ownership, government ownership and family ownership strengthens the negative relationship between CSRD and RAEM practices in comparison with the absence of managerial ownership, institutional ownership, government ownership and family ownership. This research is the first to: (i) investigate the relationship between CSRD and RAEM in the Saudi context; (ii) investigate whether the adoption of IFRS influences earnings management through RAEM by Saudi listed companies; (iii) explore various components of internal corporate governance, characteristics of the board, audit committees and ownership structures on RAEM within Saudi listed companies; and (iv) assess the interaction impact of IFRS, various components of internal corporate governance, characteristics of the board of directors, audit committees and ownership structures on the relationship between CSRD and RAEM. A theoretical explanation is presented using an integrative approach, in which the researcher applies numerous theories, including agency, institutional, legitimacy and stakeholder theories. This research provides policymakers and companies with a variety of implications related to regulations, company monitoring measures and the importance of CSRD. This research will aid understanding of the value of integrating elements of internal corporate governance to a high degree combined with CSRD on constrained RAEM. This research can inform policymakers and companies of the importance of the presence of ownership structure. These findings will benefit Saudi Arabia and countries that maintain similar institutional environments to Saudi Arabia, such as Gulf Cooperation Council countries.21 0Item Restricted Impact of Corporate Board Structure and International Financial Reporting Standards on Voluntary Risk Disclosure and Firm Value: The Case of Saudi Arabian Listed Companies(Saudi Digital Library, 2023-06-01) Murayr, Abdulaziz Ali; Islam, SardarThe global financial crisis of 2008 and 2009, combined with the digitalisation and globalisation of business, has caused multinationals and other types of corporations to become more vulnerable to a variety of risks and dangers that can undermine or damage their performance and viability. Thus, risk disclosure has received a substantial amount of attention from academics and researchers. This study focuses on voluntary risk disclosure (VRD), which concerns the disclosure of information about risks, which is mandated by government legislation and regulations, for example, processing and technology, integrity and strategic risks. This study aims to investigate the impact of the corporate governance mechanism, ownership structure and international financial reporting standards (IFRS) on the VRD practices of listed companies in Saudi Arabia. Moreover, it investigates the impact of VRD practices on a firm’s value. More specifically, the study analyses the impact of five board composition types (board size, board independence, audit committee meetings, board expertise and gender diversity) and three types of ownership structures (foreign ownership, state ownership and family ownership) on the VRD practices of Saudi listed companies. A research model is developed using agency theory, signalling theory and voluntary disclosure theory. The research model hypothesises that each of the aforementioned factors does affect the VRD practices that are employed by Saudi listed companies.A disclosure index is devised using seven selected items to measure VRD: compliance, reputational, operational, strategic, technological, commodity and sustainability risks. The study’s sample consists of all non-financial companies that are listed on the Saudi stock exchange, otherwise known as Tadawul. Secondary data aregathered from the annual reports of 108 listed companies for 2013 to 2020. Using regression analyses, the results reveal that qualification, gender diversity, state ownership and IFRS have a significant relationship with VRD. Furthermore, the findings indicate that this form of disclosure shapes firm value, which is measured using market-to-book value and return on assets. The current research provides important insights into the extent of the VRD practices of listed companies in Saudi Arabia. This study is significant given that limited research has been published on VRD in that country. This research is essential to Saudi Arabia’s stock market and international investors. Indeed, a better understanding of the disclosures of Saudi corporations may aid investors in making sound investment decisions. Examining the correlation between risk disclosure and firm value helps to identify the possible impact of investor expectations on the level of corporate VRD. The results of this study provide practitioners and owners or managers with an understanding of the attractiveness of foreign investors and the implications that this has for their investment allocations in connection with VRDs. This study contributes by providing new evidence to the related literature, including on VRDs, corporate governance and IFRS.14 0