Risk disclosure, corporate governance, and cost of capital of Saudi listed firms

Almania, Omar (2019) Risk disclosure, corporate governance, and cost of capital of Saudi listed firms. PhD thesis, University of Glasgow.

Abstract

The recent financial crisis of 2009 and corporate failures have highlighted the importance of monitoring risk-taking within corporations, raising the attention of practitioners and researchers to corporate risk disclosures. This thesis provides a comprehensive analysis, which aims to examine corporate risk disclosure practices, determinants, and implications on the cost of capital. To this end, this study employs a sample consisting of all non-financial listed firms in Saudi Arabia to investigate risk disclosure practices. All data for the study were manually collected from the annual reports of sample firms over four years (from 2012 to 2015) using content analysis. The descriptive findings show that Saudi firms disclose 24 risk-related sentences on average. Operational and financial risks appear to be the most frequent disclosed risks while strategic risks are significantly lower. Most disclosed risks in the Saudi context are positive, forward-looking, and qualitative. This study further examines the determinants of corporate risk disclosure in Saudi public firms, with particular emphasis on corporate governance mechanisms, ownership structure, Islamic values, and the Loss-Making Firms Procedures (LMFPs). The findings indicate that board size, government ownership, and inside ownership are negatively and significantly related to risk disclosure. Independent and non-executive directors are positively and significantly related to risk disclosure. However, auditor type, board education, risk management committee, institutional ownership, block ownership, and Islamic values have no statistically significant relationships with risk reporting. Using a difference-in-difference model, the results show that risk disclosure for loss-making firms has increased significantly after the introduction of the Loss-Making Firms Procedures. The evidence presented thus far supports the positive impact of corporate governance on risk disclosure by examining an exogenous shock. The results also show that risk disclosure is negatively and significantly associated with the cost of capital. These results are robust to a battery of robustness tests.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Keywords: Risk disclosure
• Subjects: H Social Sciences > HG Finance
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Supervisor's Name: Opong, Prof. Kwaku and Naeem, Dr. Shammyla
• Date of Award: 2019
• Depositing User: Dr. Omar Almania
• Unique ID: glathesis:2019-81324
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 04 May 2020 15:57
• Last Modified: 17 May 2022 12:54
• Thesis DOI: 10.5525/gla.thesis.81324
• URI: https://theses.gla.ac.uk/id/eprint/81324