Abstract
A critical glance at the literature review of GCC countries, firm performance and firm value shows that the literature does not adequately consider the uniqueness of an institutional setting such as the presence of royal family members and government officials’ members on the board. Additionally, noticeable features are not accounted for in the previous literature, such as a large involvement of relatives and the presence of a female on the board of directors. It is important to understand whether these variables matter or not in this region as this then influences the firm’s performance and firm value. Thus, this study focuses on the effect of internal CG of the firm’s performance and firm value in five GCC countries. The final sample consists of 220 firms (1,096 firm-year observations) for the fiscal year 2009 to 2013. The main finding is that there is a positive significant relationship is seen between expertise factors and firm performance. The expertise factor encompasses royal family members on the board as well as hiring one of the Big 4-auditing firms. This result is in line with a theoretical claim (agency theory), the research question expectation and empirical evidence.
Highlights
There is agreement among scholars with regard to the limitation of CG research or studies in emerging markets
A critical glance at the literature review of Gulf Cooperation Council (GCC) countries, firm performance and firm value shows that the literature does not adequately consider the uniqueness of an institutional setting such as the presence of royal family members and government officials’ members on the board
21.4 percent of shares are retained by institutional investors (INSTITC), and this indicates a high percentage of institutional ownership in the region
Summary
There is agreement among scholars with regard to the limitation of CG research or studies in emerging markets. It is important to understand whether these variables matter or not in this region as this influences the firm’s performance and firm value. This question considers some features of an audit committee and their effect on a firm’s performance and firm value. Management and investors have different interests and ways to evaluate CG; management attempt to use firm performance measurement (ROA and ROE) as the measurement to show how the wealth affects CG mechanisms. Investors seem to prefer to value the firm structure of CG based on firm value measurement (Tobin’s Q ) [13]
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