CORPORATE GOVERNANCE AND FIRMS STOCK RETURNS IN THE EMERGING MARKET

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Abstract

This paper examines the relationship between corporate governance and firms’ performance (stock returns) in the emerging market. The paper fills the need for empirical evidence on governance issues in the scarce emerging markets compared to the developed world. Exploiting a unique dataset on the corporate governance index for the largest 90 companies listed on the Saudi stock market, we construct two portfolios. We compare the performance of good governed companies and poorly governed firms. We find that good governed portfolio outperforms the poor one. Nevertheless, regression results do not show any association between corporate governance score and performance. We interpret this as weak evidence for the link between corporate governance and firms’ performance.

Keywords: Corporate Governance, Corporate Governance Index, Stock Returns, Emerging Market

Authors’ individual contribution: Conceptualization – A.A. and S.A; Methodology – A.A. and S.A; Writing – A.A and S.A; Investigation – A.A and S.A; Funding – S.A; Resources – A.A.

JEL Classification: G34, L22

Received: 23.04.2019
Accepted: 20.07.2019
Published online: 24.09.2019

How to cite this paper: Alanazi, A. S., & Alhoqail, S. A. (2019). Corporate governance and firms stock returns in the emerging market. Risk Governance and Control: Financial Markets & Institutions, 9(3), 66-73. https://doi.org/10.22495/rgcv9i3p5