Corporate Governance and Banks' Performance in the Kingdom of Saudi Arabia Pre and Post the Global Financial Crises

By

[Name of the Subject]

TABLE OF CONTENT

ACKNOWLEDGEMENT4

ABSTRACT5

EXECUTIVE SUMMARY6

CHAPTER 1: INTRODUCTION7

Background7

Research Aims9

Research Objectives9

Research Question9

Assumption10

CHAPTER 2: LITERATURE REVIEW11

Global Financial Crisis11

Causes of Global Financial Crisis12

Impact of Financial Crisis16

Corporate Governance and Global Financial Crisis17

Principles of Corporate Governance19

Corporate Governance Code of Saudi Arabia19

Agency Theory and Corporate Governance20

Corporate Governance and Banks23

Corporate governance structure of the Bank24

Backgrounder on the Basic Systems of Corporate Governance in Saudi Arabia29

Prior to the Global Financial Crisis31

Modern Corporate Governance in Saudi Arabia32

CHAPTER 3: RESEARCH METHODOLOGY33

Research Design33

Appropriateness of Research Design34

Data Collection Method34

Primary Research Method34

Secondary Data35

Qualitative v/s Quantitative Data36

Data Analysis37

Audit Committee37

Internal Control System39

Report on Corporate Governance: Disclosure and Transparency40

Population and Sampling Frame41

Research Limitations42

Validity and Reliability43

Reflection43

CHAPTER 4: DATA ANALYSIS45

Table 1 Identity of Blockholders47

Table 2: Year48

Table 3: Regression Analysis of Return on Assets (ROA)49

Table 4: Regression Analysis of Stock Returns50

CHAPTER 5: CONCLUSION53

CHAPTER 6: RECOMMENDATION58

REFERENCES62

ACKNOWLEDGEMENT

I am thankful to my research group and my lecturer who provided me support and significant knowledge about the matter and made it possible for me to successfully complete my thesis.

ABSTRACT

As a result of recent financial crisis it has become important to analyze the role of corporate governance on bank performance. Thus, the purpose of this study is to examine the relationship between corporate governance, bank performance and other financial variables. The research will be focused on determining the impact of well-defined corporate governance on corporate performance. The researcher has created a sample for the researcher which is comprised of nine banks operating in the Saudi Arabia to evaluate the importance of effective and efficient corporate governance for ensuring corporate performance. The results of the study highlighted that, when organizations using Return on Asset (ROA) as a measure for corporate performance there is a strong relationship between corporate governance and corporate performance. However, when using stock return as a performance measure, it was found out that it not essential for organizations to have effective corporate governance for achieving greater profitability and simultaneously better and improved performance.

EXECUTIVE SUMMARY

Many of the organizations have affected by the global financial crisis. A major reason for this failure of corporations is considered to be ineffective corporate governance. Effective corporate governance creates a significant impact on corporate performance; however, inability to have well-defined corporate governance structure will result in creating a negative impact on performance of the firm. There are certain characteristics of corporate governance it is important for Board of Directors to appoint an audit committee, which should be responsible for providing authentic and reliable information to the users. They should monitor and control the financial information and consequently they need to make certain that return for shareholders has been maximized. It is important to ensure that organizations have efficient corporate governance. There is a strong relationship between corporate governance and corporate performance, when using Return on Asset for determining corporate performance, since it is possible for organizations to control the return on their assets, by effectively utilizing their internal resources. Moreover, when using stock there is a weak relationship between corporate ...