Abstract
The aim of this research is to find the relationship between disclosure in annual reports as outlined in the corporate governance regulations imposed by the Saudi Capital Market Authority and companies’ performance in Saudi Arabia. To achieve that, the corporate governance disclosure regulations are classified into four categories; Ownership structure and shareholders’ rights; board of directors’ information; financial information; operational information. Each category included several variables that are disclosed on the annual reports. This research is conducted on three sectors (Banking, Cement and Multi-Investment) to measure the relationship between those variables and company performance measured by three measures, namely Return on Assets (ROA), Return on Equity (ROE) and Price to Earnings ratio (PE). The results revealed that both ROE and ROA correlate with some of the disclosure variables. However, these variables differ from one sector to the other. Very few variables correlate with the PE ratio. The result confirms results achieved by previous studies conducted on the local and international level.
Highlights
The Saudi Arabian Capital Market Authority (Board of Capital Market Authority, 2006) has issued Corporate Governance Regulations in 2006, which affected the information included on the annual reports of listed corporations
Based on the results presented in table 20, it could be concluded that the Cement sector is the only sector that has a positive correlation between Return on Assets (ROA) and both the disclosure of capital structure and the percentage of management shareholding information
Based on the above statistical analysis and testing of hypotheses, the following could be concluded regarding each sector as follows: 7.1 The Banking Sector. It appears that there is a significant effect of the information disclosed on the performance measures (ROE & ROA)
Summary
The Saudi Arabian Capital Market Authority (Board of Capital Market Authority, 2006) has issued Corporate Governance Regulations in 2006, which affected the information included on the annual reports of listed corporations. Such regulation resulted in increasing the content and amount of information provided by companies. In addition to overseeing their own rules, the stock exchanges were assigned the role of monitoring compliance with the legislation and subsidiary securities regulation They have contributed to the development of corporate governance recommendations and encouraged their application to listed companies (Christiansen & Koldertsova, 2009)
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