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How corporate governance affect firm value and profitability? Evidence from Saudi financial and non-financial listed firms

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  • Ali M. Gerged
  • Ahmed Agwili

Abstract

This paper investigates the possible effects of corporate governance (CG) mechanisms on the firm market and accounting value (FV) in Saudi Arabia after the 2011 CG reforms using a sample of 300 annual reports of financial and non-financial companies listed on Tadawul from 2012 to 2016. Our results are suggestive of heterogeneous effects of CG mechanisms on firm value and profitability in that they might have either encouraged or discouraged FV in Saudi Arabia. This means that, averagely, better-governed firms tend to achieve better market value, but not necessarily a better accounting value. Our findings indicate that implementing a voluntary 'comply-or-explain' CG regime in Saudi Arabia has, so far, a limited impact on FV. This implies that developing other enforcement mechanisms for CG provisions, such as appending good CG practices to listing rules for companies to comply with, might lead to better financial results for those well-governed companies in Saudi Arabia. Despite the limitations, it is hoped that our study can inspire further examinations in this research area.

Suggested Citation

  • Ali M. Gerged & Ahmed Agwili, 2020. "How corporate governance affect firm value and profitability? Evidence from Saudi financial and non-financial listed firms," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 14(2), pages 144-165.
    • Handle: RePEc:ids:ijbget:v:14:y:2020:i:2:p:144-165
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    Citations

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    Cited by:

    1. Martha Matashu & Wedzerai S Musvoto, 2022. "Corporate governance as the driver of economic growth in Sub-Saharan African Countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 15(1), pages 16-26, July.
    2. Monika Kussetya Ciptani & Mila Reyes & Regitha Seshanda Azizah, 2024. "Balancing Audit Quality to Auditees Cash Reserves: A Phenomenon in Indonesia," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(4), pages 824-835, April.
    3. Renuka Sharma & Kiran Mehta & Archana Goel, 2023. "Non-linear relationship between board size and performance of Indian companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(4), pages 1277-1301, December.
    4. Fahd Alduais & Nashat Ali Almasria & Rana Airout, 2022. "The Moderating Effect of Corporate Governance on Corporate Social Responsibility and Information Asymmetry: An Empirical Study of Chinese Listed Companies," Economies, MDPI, vol. 10(11), pages 1-23, November.
    5. Ali Meftah Gerged & Khaldoon Albitar & Lara Al‐Haddad, 2023. "Corporate environmental disclosure and earnings management—The moderating role of corporate governance structures," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2789-2810, July.

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