Corporate Governance in Developing Nations: Evidence from Unlisted Family Firms in Saudi Arabia

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Abstract Companies in developed and developing countries worldwide are interested in effective corporate governance (Al-Bassam, 2014). In fact, the collapse of prominent organisations such as Enron, WorldCom, and Xerox has been attributed to poor corporate governance practices (Gurbuz et al., 2010). The concept of corporate governance is becoming more important not only in large listed companies but also in unlisted family firms (Sun, 2009). Scholars have proposed that good corporate governance practices increase organisational performance and could hold numerous benefits for family firms (Mallin, 2016). The Saudi Arabian private sector largely consists of small and medium-sized family firms (Waked, 2016). Moreover, unlisted family firms play a significant role in the Saudi Vision 2030 economic development plan. Therefore, these firms need to embrace better corporate governance practices to achieve their short- and long-term objectives. This thesis investigates corporate governance practices in unlisted family firms in Saudi Arabia and explores the main internal and external factors that affect the corporate governance practices in these businesses. The research relies on new institutional sociology as a theoretical framework because of the impact of institutional pressures (isomorphism) on organisational structures and their development and effect on the corporate governance system (Nordqvist and Melin, 2002). The primary data in this study were gathered using both semi-structured interviews and a questionnaire survey. The results indicate that most of these businesses do not use a corporate governance code. The participants expressed many different opinions and contradictory views about the concept of corporate governance, its applications, and the related practices in unlisted family firms in Saudi Arabia. The finding of this study further show that isomorphic pressure is limited or absent in shaping the corporate governance system within the Saudi institutional environment. The study offers recommendations for policy makers to improve the governance applications in unlisted family firms to boost the Saudi economy as projected in Saudi Vision 2030.