Studies and Research
​​​​This page provides research and studies on issues relevant to the capital market activities to support policy decision making and enrich financial literacy of the public. The analyses and opinions in those research and studies express the authors' views and do not necessarily reflect CMA's opinion.


ESG and Financial Sustainability: The Role of Saudi Corporate Governance Reforms

 May ​​2023                                                                                


There is rising interest among investors and regulators in companies' Environment, Social, and Governance (ESG) practices. Despite this, the various implications of ESG remain vague. To this end, this paper examines the relationship between corporate ESG and financial sustainability and how corporate governance reforms and pandemics can influence this relationship. Using a dataset comprising public companies on the Saudi Stock Exchange (Tadawul) between 2013 and 2021, we found that corporate ESG disclosure and financial sustainability are positively related. Moreover, the corporate governance reform of 2017 positively moderated this relationship, while the Covid-19 pandemic negatively moderated it. The results of this study contribute to the corporate governance and sustainability literature by providing new evidence that corporate ESG may improve financial sustainability and that this relationship is sensitive to corporate governance regulations and market conditions. These results have practical implications and may inform investors' and regulators' decisions.

 ESG and Financial Sustainability: The Role of Saudi Corporate Governance Reforms

The Impact of The Development of Corporate Governance Regulations and Policies on Investors’ Confidence in Companies Listed on the Saudi Arabian Stock Exchange (TADAWUL)

 October 2022                                                                                 


This study aims to examine the relationship between the development of Corporate Governance (CG) regulations and policies, and investors' confidence in non-financial firms listed on the Saudi Arabia Stock Exchange (Tadawul) in the period from 2006 to 2020.

The Impact of Social Performance on Financial Performance of Listed Companies in Saudi Arabia 

JUL 2021                                                            ​                     


The relation between corporate social performance (CSP) and corporate financial performance (CFP) has been extensively researched. In this paper, we extend this research into the Saudi market by examining all publicly listed companies. Our findings reveal that there is no significant relation between CSP and the financial performance of Saudi listed companies. However, looking at the different aspects of corporate social responsibility (CSR), we document that the environmental CSR and the stakeholder CSR have a positive and significant effect on the financial performance metric of return on invested capital.

Keywords: Corporate social performance; corporate financial performance; corporate social responsibility.


                                       The Impact of Social Performance on Financial Performance of Listed Companies in Saudi Arabia               


The impact of ownership structure on firms performance

April 2021                                                                                 


In this study, we develop a new method of ownership classification and examine the impact of various owners on firm performance. Prior research focuses mainly on managerial ownership and/or a few general classifications (block-holders vs. non-block-holders, institutional vs. non-institutional). No prior studies attempt to model all corporate owners together in one model. This study fills this gap. Our classification divides listed corporations into government, institutional, public, managerial, family, and foreign owners. Analyzing and comparing these companies yields several important findings. First, government and institutional firms perform the best, while public and managerial firms perform the worst. Second, the OLS and simultaneous system 2SLS estimates suggest that government and institutional ownership contribute positively to firm performance, while public ownership has a negative effect. Incorporating the potential endogeneity issue into the system suggests that the relationship is bidirectional, where the causality runs from ownership to performance and vice versa.

                                       The impact of ownership structure on firms performance


Survey of specialists' opinions on the mandatory detailed disclosure of the remuneration and compensation of senior executives


March 2021

A number of listed companies submitted a proposal to the Capital Market Authority regarding the continuing disclosure in aggregate of the remuneration and compensation of senior executives in the Board report of the listed companies on the Saudi Stock Exchange. This proposal is based on Subparagraph (B-4) of the paragraph (A) of the article 93 of the Corporate Governance Regulation. Which stipulates "A) The Board shall: … 4) a description of the necessary details with respect to the remunerations and compensations granted to each of the following, separately: ... B. Five Senior Executives who have received the highest remuneration from the Company, provided that the chief executive officer and chief financial officer are among them", The disclosures in the Board report of the remunerations granted to the Board members and Senior Executive should be based on Appendix (1) Remuneration Schedule in the Corporate Governance Regulation. Consequently, the Authority has studied the matter and took the opinions of a group of people working in the financial market sector.

                                      Survey of spec​​ialists' opinions on the mandatory detailed disclosure of the remuneration and compensation of senior executives



​​​​​​​​​Has the issuance of the loss-​making companies' procedures contributed to improving the financial performance of these companies?

September 2020                                                                                 


In mid-2014, the Saudi Capital Market Authority has introduced new procedures and instructions related to listed companies with accumulated loss of their share capital. The present study questions whether the enforcement of these procedures has improved the financial performance of targeted firms using Difference-in-Difference models. The results show a positive and significant impact of the introduction of these procedures on financial performance of loss-making firms. The average improvement of the return on assets, which is contributed by the procedures, is estimated to be 8.4%. The results are robust given the results of the Placebo test where a false shock is presumed in addition to the results of sub-samples. The study also finds a positive spillover-effect on other loss-making firms. The study, further, applies Difference-in-Difference-in-Difference models to identify the channels where the improvement of financial performance has emerged. The results show that the increases in assets` efficiencies and profitability are the channels of the improvement.

​The Effect of Incentive Structure Offered to Top Executives and Corporate Governance Culture on the Performance of Publicly Listed Companies in Saudi Arabia

September 2020

the performance of a business has always intrigued researchers and investors alike, This report provides an overview of the incentives offered to the top five executives in publicly listed companies in Saudi Arabia and investigates its impact on their performance. The findings suggest that the majority of the companies offers short-term contracts, but the executives tend to stay longer than the duration of the standard contract. About a quarter of the companies believe that their top executives' salary is below their local competitors and about one in every ten companies believe that their top executive salary is better than their competitors, which is positively related to performance. Most of the companies offer incentive structures that focus on short term interest of the shareholders which is found to have a positive impact on performance. Around 15% of the firms offer long term bonuses in our sample. These companies, however, tend to consistently outperform companies which do not offer retention bonuses and the effect is more pronounced than the short-term incentives. Majority of the companies do not offer stockownership as part of the incentive scheme, but a good number has reported stockownership by top executives as a personal investment which has a positive impact on performance. Around two-thirds of the companies reported that they offer bonuses to non-executive employees with a complex set of criteria to award bonuses. Interestingly, this has a significant negative impact on performance which points toward problems underlying these incentives schemes, Saudi companies do not offer any stock-option as part of the incentive scheme which is getting popular these days around the world.​

The Impact of Shari'a Compliance Advices (SCAs) on the Saudi Capital Market: Evidence from the IPO Market     

December, 2018                                                                                  

shutterstock_6666.jpgThis report documents the finding of investigation on how investors in Saudi Arabia react to Shari'a scholars' advices, about the compliance of an investment to Islamic teachings they adhere to. The setting of Saudi Arabia initial public offerings (IPOs) market enables to map the decisions of individuals to subscribe into as IPO with the Shari'a compliance advices, Shari'a scholars announced about that particular IPO.

The number of individuals subscribing to an IPO is expected to drop by 80% if Shari'a scholars agree all to reject the IPO firm A  Shari'a compliant firm in their compliance advices announced during the IPO subscription period. Moreover, if Shari'a scholars disagree about the Shari'a compliance status of a firm, individuals tend to react to the scholars who approved the IPO as a Shari'a compliant investment while show no significant reaction to the advice of the ones who rejected it.


The Information Content of Earnings Announcements : Evidence from the Saudi Market 

JAN 2019

Do earnings announcements convey useful information to investors in the marketplace? Our results reveal that the market reaction to the information content of earnings announcement, measured by abnormal trading volume, has been increasing over the years. The results provide supportive evidence that regulatory applications have played an important role to enhance the efficiency of announcements released by companies in the marketplace. Additionally, our findings suggest that the leakage of information and the level of insider trading have relatively decreased due to the Capital Market Authority's efforts in improving the information                                                         environment. ​

 The Information Content of Earnings Announcements : Evidence from the Saudi Market ​


An Empirical Investigation of the Post-IPO Operating Performance in the Saudi Stock Market

May 2018

Consistent with the empirical findings in the literature in developed and emerging markets, our analysis suggests that the operating performance, measured by return on assets (ROA) and return on equity (ROE), deteriorates in post-IPO period. The analysis has been conducted on the firm level, industry level, across time, based on the use of the IPO proceedings, and government holdings before and after the IPO. The main result of the analysis still holds in all specifications. Data Envelopment Analysis (DEA) technique has also been implemented to investigate the question in hand. DEA allows us to examine the difference between the pre-and the post-IPO operating performance based on several inputs and outputs. The empirical results are similar to the analysis of means. Most companies show a decline in their performance relative to their pre-IPO performance. 
This is the final report of the project “An Empirical Investigation of the Post-IPO Operating Performance in the Saudi Stock Market”. This report summarizes the two previous reports and adds further analysis to the post-IPO operating performance across sectors, time, government ownership, and the IPO proceedings. Also, this report discusses the challenges and the opportunities encountered by the team throughout the project stages. Finally, the report concludes and gives recommendations that arise from the analysis and the investigation process.​


Mutual Funds Performance in Saudi Arabia

This study offers a consideration of the performance of locally focused equity mutual funds in Saudi Arabia, specifically in comparison to the performance of their benchmarks in the Saudi Arabian context. The purpose is to present an in-depth analysis of the performance of Saudi equity mutual funds. The central research question is: Do locally focused equity mutual funds outperform the Saudi market?​

 Mutual Funds Performance in Saudi Arabia



The CMA and the Saudi Stock Market Crash of 2006 (summary)

By the end of 2006, the stock market’s main index (TASI) had lost approximately 65% of its value, and market capitalization had fallen by half. Also the global financial crisis of 2008 had caused the stock market to plummet even more than it had in 2006, two lessons from this experience should be learned.

  • First, what could it have done to prevent the crash at the time?
  • ?