Introduction

The topic of corporate governance is increasingly becoming popular in the modern business society. This has been as a result of the significant cases of high-profile companies whose downfall has been as a result of financial misappropriations and mega scandals. Anderson, Adelphia Enron, WorldCom, Allied Irish Bank, and Xerox are some of the high-profile companies that have collapsed as a result of corporate governance issue (Kajananthan, 2012).  Such scandals have lead to mass job losses, loss of investment and shrinking of tax collection. The issue has become an integral part of the Saudi Arabia stock market. The introduction of Saudi Arabia Corporate Governance Codes of 2006 marked the long journey of ensuring that the concept of corporate governance is maintained..

Research objective

As mentioned earlier, the increasing cases of financial misappropriations and massive scandals have made it necessary for investors and regulators to have a particular interest in rules and regulations concerned with corporate governance.  Also, the financial crisis of 2008 has also made it necessary to have sound corporate governance practices that will ensure sustainability and best performances of publicly listed companies (Jo and Harjoto, 2011).  Many scholars have since engaged in serious studies to identify the relationship between corporate governance, the company value and the overall financial performance of the publicly listed companies.  In essence, the research problem that the study intends to answer is the lack of consensus concerning the relationships between corporate governance, company value, and financial performance. It is evident that most business leaders of the publicly listed companies in Saudi Arabia do not have sufficient information on the relationship between corporate governance and the financial performance of the publicly traded companies.

Research questions

The research question intends to fulfill the objective of the study. In this case, the purpose of the survey is to have a clear understanding of the relationship between corporate governance and the overall performance of the publicly listed companies. It is imperative that the stakeholders of an organization get the position that is for the best interests of the enterprise.  In essence, the study will;

• Identify the impact of the board of directors to the performance of the publicly listed companies in Saudi Arabia.
• Determine the relationship between individual corporate governance mechanisms and the firm’s financial performance
• Determine whether there is any relationship between board size and the financial performance of all the publicly listed companies.
• Establish whether there exist any relationship between corporate governance and corporate financial performance for publicly listed companies in Saudi Arabia
• Establish whether there is any relationship between the corporate governance and the market value of publicly listed companies in Saudi Arabia.

Motivation

As aforementioned, many high profile corporate bodies have collapsed resulting from corporate governance issues. As a result, there have been numerous studies on corporate governance in the context of developed countries such as the United Kingdom and the United States. However, there is information gap on this concept especially on developing economies of which Saudi Arabia is part of (Krafft,  Qu, Quatraro and Ravix, 2013). The choice of Saudi Arabia as the choice of this study is the fact that there is little literature on the issue of corporate governance and its impacts on company practices. The introduction of Corporate Governance Regulation by the Capital Market Authority in 2006 makes it necessary for a study of corporate governance. It is also noting that the importance of the Saudi Arabia economy to the Gulf region and the whole world cannot be underestimated.

Methodology, data collection, and analysis

The research will involve a hybrid of both qualitative and quantitative research designs. It is imperative to note that the study will collect as much information as possible regarding listed companies in Saudi Arabia and how the different variables are related to corporate governance. A sample will be taken from the over 140 companies listed on Saudi stock exchange. The sample choice will be randomly chosen in all the industries such as service providers, manufacturing, and financials.

The data collected will involve both primary and secondary data. Secondary sources will include firm’s annual reports, CLSA reports, books and findings from the previous studies. It will also involve conducting interviews to several shareholders, the board of directors and other stakeholders in these publicly traded companies (Judge, 2011). The interview process will be guided by use of a questionnaire to ensure that all variables are adequately covered. It is worth noting that the data collected will be classified in tables and regression analysis will be used for analysis and interpretation.

Significance of the study

The stock market sector in Saudi Arabia is an attractive one since it is one of the most traded markets in the Gulf region. It is hoped that this study will make significant to the contribution to the concept of corporate governance.  Firstly, the study will make an important contribution to the literature of corporate governance. For instance, the agency problem theory has been widely used in the previous studies (McNulty and Douglas, 2013). This research process will give more insights into the concept and help proper understanding of the notion. Besides, the study will also explain the importance of us using multiple theories to help understand a business concept (Kim and Lu, 2013). It is also prudent noting that the idea of corporate governance is gaining momentum in Saudi Arabia and other developing countries. It is, therefore, my hope that this research paper will be useful to other nations with similar political, cultural, economic and environmental conditions. Last but not least, the findings of this empirical study will make a significant contribution to the extant literature by assessing corporate governance reforms for policy-makers and regulatory bodies.

Limitations of the study

The results of any research process are paramount for scholars and practitioners in the different field. It is, however, imperative noting that every research process has some limitations that to a great extent limit the success of the research process. For instance, the sample size for the research process is quite small due to limited resources. The number of listed companies involved in the research process was limited due to limited time and lack of personnel. It is also important to note that the interviewing process could be hampered by bias and lack of objectivity thus limiting the effectiveness of the research process.

References

Jiraporn, P. Kim, J. and Kim, Y. (2011). ‘Dividend Payouts and Corporate Governance Quality: An Empirical Investigation’, The Financial Review, Vol. 46, No. 2, Pp.251-279.

Jo, H. and Harjoto, M. (2011). ‘Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility’, Journal of Business Ethics, Vol. 103, No. 3, Pp.351-383.

Johl, S. Bruce, A. and Binks, M. (2012). ‘A Study on the Use of Mixed Method Approach via Sequential Procedure to Investigate Corporate Governance in Corporate Entrepreneurship among the 100 UK Financial Times Stock Exchange (FTSE) Companies’, African Journal of Business Management, Vol. 6, No. 21, Pp.6369-6377.

Judge, W. (2011). ‘The Multiple Levels of Analysis Involved with Corporate Governance Studies’, Corporate Governance: An International Review, Vol. 19, No. 1, Pp.1-2.

Kajananthan, R. (2012). ‘Effect of Corporate Governance on Capital Structure: Case of the Structure Listed Manufacturing Companies’, Journal of Arts, Science and Commerce, Vol. 3, No. 4, Pp.63-71.

Kim, H. and Lu, Y. (2013). ‘Corporate Governance Reforms around the World and Cross-border Acquisitions’, Journal of Corporate Finance, Vol. 22, September, Pp.236-253.

Krafft, J. Qu, Y. Quatraro, F. and Ravix, J. (2013). ‘Corporate Governance, Value and Performance of firms: New Empirical Results on Convergence from a Large International Database’, Industrial and Corporate Change, doi: 10.1093/icc/dtt007, Pp.1.37.

Mangena, M. Tauringana, V. and Chamisa, E. (2012). ‘Corporate Boards, Ownership Structure and Firm Performance in an Environment of Severe Political and Economic Crisis’, British Journal of Management, Vol. 23, No. S1, Pp.23-41.

McNulty, T. Zattoni, A. and Douglas, T. (2013). ‘Developing Corporate Governance Research through Qualitative Methods: A Review of Previous Studies’, Corporate Governance: An International Review, Vol. 21, No. 2, Pp.183-198.

Ntim, C. Lindop, S. Osei, K. and Thomas, D. (2014). ‘Executive Compensation, Corporate Governance and Corporate Performance: A Simultaneous Equation Approach’, Managerial and Decision Economics, (Forthcoming).

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