Corporate Governance and Financial Policies of Family Businesses Listed on the Saudi Stock Exchange (Tadawul)

Abstract

The main aim of this study is to investigate the relationship between family ownership, characteristics of board of directors and both the dividend policy and capital structure in the Saudi context. Saudi Arabia is a member of the G20 group and one of the leading countries in the Middle East and among developing states. It is distinguished by different economic and financial systems to more advanced and developed countries. In addition, the Saudi Arabian economy is largely characterised by family-owned businesses. Furthermore, the ownership structure of the listed Saudi Arabian companies is dominated by families. However, little research has been conducted to examine the association between family ownership, characteristics of board directors and both the dividend policy and capital structure in the Saudi setting. Therefore, it is vital to address the research gap in the existing literature review. Groups of theories and frameworks used in the current study include social emotional wealth theory, agency, stewardship, stakeholder theory, transaction cost and political theories. As a result of reviewing of these theories and findings, a range of hypotheses have been formulated. Additionally, the data were gathered from the Refinitiv Eikon and company annual reports of 88 non-financial firms listed on the Saudi Stock Exchange from 2010 to 2018, for a total of 787 observation year data sets. Panel regression procedures employed to analyse the data include random effects logistics, random effects tobit, panel correction standard error regressions and the generalised method moments estimator.