The Impact of Corporate Governance on Financial Performance in Saudi Listed Companies

Abstract

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.