Corporate governance mechanisms and firm performance in Saudi Arabia before and during the COVID-19 outbreak

Figures & data

Table 1. Variables description

Variable	Symbol	Description
Operational performance
Return on assets	ROA	The ratio of net income to total assets.
Financial performance
Return on equity	ROE	The ratio of net income to total equity.
Market Performance
Tobin’s Q	TQ	The ratio of (equity + current liabilities) to total assets.
Corporate governance
Board size	BSIZE	Number of members on the board.
Board meetings	BMEET	Number of meetings held during the financial year.
Board independence	BINDEP	Number of independents on the board.
Board experience	BEXP	Number of members with experience in other firm boards.
Board education	BEDUC	Number of members with a business education degree.
Board gender	BGENDER	Number of females on the board.
Audit committee size	ASIZE	Number of members on the audit committee.
Audit committee meetings	AMEET	Number of meetings held during the financial year.
Audit committee independent	AINDEP	Number of independents on the audit committee.
Audit committee experience	AEXP	Number of members with experience in auditing.
Audit committee education	AEDUC	Number of members with an accounting or finance education degree.
Firm characteristics
Size	Size	The natural logarithm of total assets.
Leverage	Leverage	The ratio of total liabilities to total assets.
Liquidity	Liquidity	The ratio of current assets to total current liabilities.

Table 2. Sample distribution

No.	Sectors	Number of Firms	Percent
1	Capital Goods	12	9%
2	Commercial & Professional Svc	3	2%
3	Consumer Durables & Apparel	6	5%
4	Consumer Services	8	6%
5	Diversified Financials	4	3%
6	Energy	5	4%
7	Food & Beverages	11	9%
8	Food & Staples Retailing	4	3%
9	Health Care Equipment & Svc	7	5%
10	Materials	40	31%
11	Media and Entertainment	1	1%
12	Pharma, Biotech & Life Science	1	1%
13	Real Estate Mgmt & Dev’t	9	7%
14	Retailing	6	5%
15	Software & Services	2	2%
16	Telecommunication Services	3	2%
17	Transportation	5	4%
18	Utilities	2	2%
	Total	129	100%

Notes: The sample is the actual population of listed Saudi firms from 18 sectors

Table 3. Descriptive statistics

Variable	Obs. No	Minimum	Maximum	Mean	Std. Deviation
Firm performance
Return on Assets	258	−0.647	0.251	0.012	0.103
Return on equity	258	−6.191	0.911	−0.033	0.520
Tobin’s Q	258	0.097	1.000	0.800	0.169
Corporate governance
Board size	258	4	11	8.267	1.521
Board meetings	258	1	15	5.186	1.899
Board independence	258	0	8	3.891	1.301
Board experience	258	1	11	6.791	2.110
Board education	258	1	11	6.105	2.289
Board gender	258	0	2	0.105	0.354
Audit committee size	258	3	7	3.601	0.789
Audit committee meetings	258	2	22	5.725	2.329
Audit committee independent	258	0	4	1.640	0.941
Audit committee experience	258	0	7	2.810	1.122
Audit committee education	258	0	5	1.833	1.196
Firm characteristics
Size	258	41.16	1,914,261	26,595.98	158,392.60
Leverage	258	0.008	0.960	0.449	0.239
Liquidity	258	0.001	13.470	2.085	2.022

Notes: The assets size (in SAR million).

Table 4. The correlation matrix

	ROA	ROE	TQ	BSIZE	BMEET	BINDEP	BEXP	BEDUC	BGENDER	ASIZE	AMEET	AINDEP	AEXP	AEDUC	Size	Leverage	Liquidity
ROA	1
ROE	0.71*	1
TQ	0.01	−0.04	1
BSIZE	0.20*	0.20*	−0.21*	1
BMEET	−0.09	−0.07	−0.27*	0.20*	1
BINDEP	0.02	0.05	−0.03	0.40*	0.09	1
BEXP	0.12	0.13*	−0.15*	0.68*	0.17*	0.24*	1
BEDUC	0.08	0.11	−0.06	0.61*	0.21*	0.18*	0.63*	1
BGENDER	0.16*	0.06	0.09	0.10	−0.07	0.07	−0.09	−0.03	1
ASIZE	0.15*	0.12*	−0.05	0.31*	0.15*	0.09	0.27*	0.24*	−0.06	1
AMEET	0.05	0.09	−0.02	0.23*	0.35*	0.05	0.19*	0.26*	−0.08	0.14*	1
AINDEP	0.12	0.08	−0.07	0.09	−0.11	0.31*	0.02	−0.02	−0.07	0.09	−0.10	1
AEXP	0.16*	0.12	−0.05	0.24*	0.10	−0.05	0.45*	0.47*	−0.12	0.55*	0.15*	0.08	1
AEDUC	0.15*	0.14*	0.01	0.14*	0.03	0.11	−0.14*	−0.06	0.00	0.23*	−0.04	0.21*	0.07	1
Size	0.27*	0.18*	−0.44*	0.46*	0.23*	0.05	0.38*	0.33*	0.02	0.35*	0.17*	0.15*	0.32*	0.07	1
Leverage	−0.23*	−0.25*	−0.67*	0.09	0.23*	0.01	0.12	0.11	−0.07	−0.01	0.01	0.00	0.07	−0.09	0.22*	1
Liquidity	0.18*	0.13*	0.37*	−0.17*	−0.18*	−0.08	−0.15*	−0.24*	0.07	−0.01	−0.04	0.00	−0.15*	0.02	−0.18*	−0.64*	1

Notes: ROA, the ratio of net income to total assets; ROE, the ratio of net income to total equity; TQ (Tobin’s Q), the ratio of (equity + current liabilities) to total assets; BSIZE, board size; BMEET, board meetings; BINDEP, board independence; BEXP, board experience; BEDUC, board education; BGENDER, board gender; ASIZE, audit committee size; AMEET, audit committee meetings; AINDEP, audit committee independent; AEXP, audit committee experience; Size, the natural logarithm of total assets; Leverage, the ratio of total liabilities to total assets; Liquidity, the ratio of current assets to current liabilities. * indicates the statistical significance at the 5% level.

Table 5. The results of the pre and post COVID-19 for Saudi firms

Variable	Pre-COVID-19 (1)		Post-COVID-19 (2)		Differ	Paired T-Test^a		Wilcoxon Test^b
	Mean	SD	Mean	SD	(2) - (1)	t-test	p-value	z-test	p-value
Firm performance
ROA	0.013	0.117	0.012	0.086	−0.001	−0.105	0.917	−0.027	0.978
ROE	−0.041	0.667	−0.026	0.315	0.015	0.280	0.780	−0.551	0.581
TQ	0.793	0.178	0.807	0.159	0.014	1.215	0.227	−0.542	0.588
Corporate governance
BSIZE	8.220	1.537	8.310	1.509	0.090	1.614	0.109	−1.509	0.131
BMEET	5.140	1.694	5.230	2.090	0.090	0.633	0.528	−0.288	0.774
BINDEP	3.860	1.345	3.920	1.260	0.060	0.700	0.485	−0.361	0.718
BEXP	6.760	2.113	6.820	2.116	0.060	0.97	0.334	−0.945	0.345
BEDUC	6.085	2.305	6.124	2.281	0.039	0.673	0.502	−0.662	0.508
BGENDER	0.100	0.350	0.110	0.359	0.010	0.446	0.656	−0.447	0.655
ASIZE	3.630	0.848	3.570	0.726	−0.060	−1.068	0.287	−0.915	0.360
AMEET	5.500	2.299	5.950	2.346	0.450	2.174*	0.032	−3.194*	0.001
AINDEP	1.590	0.957	1.690	0.925	0.100	2.231*	0.027	−2.208*	0.027
AEXP	2.840	1.223	2.780	1.015	−0.060	−1.021	0.309	−0.907	0.365
AEDUC	1.810	1.180	1.860	1.217	0.050	1.044	0.299	−1.16	0.246
Firm characteristics
Size	25,028.86	140,306.58	28,163.11	175,161.50	3,134.25	0.962	0.338	−0.528	0.598
Leverage	0.452	0.245	0.445	0.234	−0.007	−0.678	0.499	−0.485	0.627
Liquidity	2.111	2.142	2.059	1.902	−0.052	−0.427	0.670	−0.582	0.561

Notes: ^a is the parametric paired samples t-test; ^b is the non-parametric Wilcoxon signed ranks test; * indicates the statistical significance at the 10% level.

Table 6. The random effect model (REM) regression for the whole sample period

	(1)	(2)	(3)	(4)	(5)	(6)
Variables	ROA	ROE	TQ	ROA	ROE	TQ
BSIZE	0.0118	0.0498	−0.0276**	0.0138	0.0560	−0.0142
	(0.00965)	(0.0388)	(0.0112)	(0.0103)	(0.0455)	(0.0113)
BMEET	0.000118	−0.0170	−0.00529	−0.00199	−0.0231	−0.00610
	(0.00541)	(0.0245)	(0.00370)	(0.00515)	(0.0236)	(0.00410)
BINDEP	−0.00743	−0.00947	−0.0130	−0.00334	−0.00379	−0.0113
	(0.00514)	(0.0223)	(0.0108)	(0.00471)	(0.0245)	(0.0110)
BEXP	−0.000298	0.00248	0.0189***	−0.00128	0.00540	0.00660
	(0.00625)	(0.0190)	(0.00588)	(0.00471)	(0.0152)	(0.00672)
BEDUC	−0.000363	−0.0142	0.0155***	−0.00356	−0.0125	0.00985**
	(0.00420)	(0.0190)	(0.00493)	(0.00426)	(0.0169)	(0.00469)
BGENDER	0.0313**	0.0603	0.0431**	0.0410***	0.0536	0.0378*
	(0.0128)	(0.0719)	(0.0214)	(0.0136)	(0.0456)	(0.0226)
ASIZE	−0.00390	−0.00800	0.00789	−0.00197	−0.0237	0.0121
	(0.00897)	(0.0417)	(0.0121)	(0.00899)	(0.0365)	(0.0122)
AMEET	0.00247	0.0225	0.000693	0.00169	0.0198	0.00105
	(0.00351)	(0.0218)	(0.00350)	(0.00362)	(0.0232)	(0.00364)
AINDEP	0.0150	0.0585	−0.00965	0.0153	0.0440	−0.00427
	(0.0129)	(0.0875)	(0.00999)	(0.0101)	(0.0653)	(0.00918)
AEXP	0.0144	0.0142	0.0160	0.00974	0.0218	0.00565
	(0.00935)	(0.0642)	(0.0111)	(0.0101)	(0.0458)	(0.0108)
AEDUC	−0.00243	0.0386	−0.00563	0.00404	0.0519	−0.000687
	(0.00676)	(0.0236)	(0.00836)	(0.00657)	(0.0344)	(0.00744)
Size	0.0144*	0.0581	−0.0373**	0.0147*	0.0582	−0.0379***
	(0.00851)	(0.0384)	(0.0164)	(0.00797)	(0.0357)	(0.0136)
Leverage	−0.125**	−0.608**	−0.627***	−0.101**	−0.683*	−0.566***
	(0.0496)	(0.308)	(0.0872)	(0.0501)	(0.383)	(0.0842)
Liquidity	0.00276	0.00930	−0.0186***	0.00231	−0.00400	−0.0138**
	(0.00332)	(0.0155)	(0.00599)	(0.00397)	(0.0155)	(0.00572)
D2020	−0.00429	−0.00807	0.0126*
	(0.00789)	(0.0422)	(0.00765)
Constant	−0.237***	−0.822**	1.358***	−0.188**	−0.723*	1.401***
	(0.0828)	(0.355)	(0.114)	(0.0821)	(0.410)	(0.0934)
Observations	258	258	258	258	258	258
R^2	0.376	0.314	0.673	0.226	0.176	0.609
LM test	14.87***	2.07*	36.25***	19.86***	5.94***	35.51***
Robust standard errors	YES	YES	YES	YES	YES	YES
Sector dummies	YES	YES	YES	-	-	-
Sector dummies × D2020	-	-	-	YES	YES	YES

Notes: ROA, net income to total assets ratio; ROE, net income to total equity ratio; TQ (Tobin’s Q), (equity + current liabilities) to total assets ratio; BSIZE, board size; BMEET, board meetings; BINDEP, board independence; BEXP, board experience; BEDUC, board education; BGENDER, board gender; ASIZE, audit committee size; AMEET, audit committee meetings; AINDEP, audit committee independent; AEXP, audit committee experience; Size, the natural logarithm of total assets; Leverage, total liabilities to total assets ratio; Liquidity, current assets to current liabilities ratio; D2020, the dummy variable of the year 2020. ***, ** and * are the statistical significance levels at the 1%, 5% and 10% respectively.

Table 7. The pooled OLS regression for separate years 2019 and 2020

	2019			2020
	(1)	(2)	(3)	(4)	(5)	(6)
Variables	ROA	ROE	TQ	ROA	ROE	TQ
BSIZE	0.0177	0.0852	−0.0428***	−0.00320	0.00171	−0.0238*
	(0.0123)	(0.0635)	(0.0141)	(0.0101)	(0.0458)	(0.0134)
BMEET	−0.0151	−0.0616	0.000844	0.00503	0.00919	−0.0108*
	(0.00959)	(0.0476)	(0.00695)	(0.00304)	(0.0178)	(0.00610)
BINDEP	−0.00258	−0.00238	−0.00381	−0.0106*	−0.0239	0.0101
	(0.00730)	(0.0353)	(0.0111)	(0.00632)	(0.0204)	(0.0102)
BEXP	−0.00323	0.00170	0.0198**	0.00266	0.0110	0.00591
	(0.00767)	(0.0302)	(0.00818)	(0.00794)	(0.0191)	(0.00752)
BEDUC	−0.000440	−0.0197	0.0160**	−0.00131	−0.00247	0.0159**
	(0.00575)	(0.0304)	(0.00657)	(0.00456)	(0.0147)	(0.00659)
BGENDER	0.0290	0.0734	0.0792***	0.0383**	0.0560	0.0435
	(0.0200)	(0.127)	(0.0295)	(0.0167)	(0.0606)	(0.0290)
ASIZE	−0.00866	−0.0164	0.0174	0.00989	0.0338	0.0153
	(0.0163)	(0.0896)	(0.0186)	(0.00940)	(0.0349)	(0.0157)
AMEET	0.00232	0.0296	0.00141	0.00127	0.00399	0.00219
	(0.00465)	(0.0291)	(0.00543)	(0.00354)	(0.0134)	(0.00597)
AINDEP	0.00443	0.00535	−0.00281	0.00270	0.00859	−0.0153
	(0.0137)	(0.0836)	(0.0151)	(0.00752)	(0.0478)	(0.0111)
AEXP	0.0156	−0.00107	0.0122	0.0138	0.0291	0.00604
	(0.0151)	(0.118)	(0.0155)	(0.00942)	(0.0529)	(0.0145)
AEDUC	−0.00105	0.0750*	−0.00242	0.00511	0.0103	0.00188
	(0.00822)	(0.0447)	(0.0110)	(0.00837)	(0.0218)	(0.0108)
Size	0.0188*	0.0842	−0.0247***	0.0124*	0.0223	−0.0285***
	(0.0102)	(0.0580)	(0.00778)	(0.00675)	(0.0206)	(0.00712)
Leverage	−0.0505	−0.390	−0.547***	−0.148***	−0.693**	−0.409***
	(0.0585)	(0.336)	(0.0895)	(0.0452)	(0.271)	(0.0686)
Liquidity	0.00709	0.0276	−0.0161**	0.00368	−0.00678	−0.0107*
	(0.00552)	(0.0230)	(0.00693)	(0.00534)	(0.0155)	(0.00562)
Constant	−0.252**	−1.160*	1.242***	−0.158**	−0.300*	1.185***
	(0.107)	(0.617)	(0.0994)	(0.0663)	(0.172)	(0.0967)
Observations	129	129	129	129	129	129
R^2	0.399	0.322	0.690	0.459	0.372	0.695
Robust standard errors	YES	YES	YES	YES	YES	YES
Sector dummies	YES	YES	YES	YES	YES	YES

Notes: ROA, net income to total assets ratio; ROE, net income to total equity ratio; TQ (Tobin’s Q), (equity + current liabilities) to total assets ratio; BSIZE, board size; BMEET, board meetings; BINDEP, board independence; BEXP, board experience; BEDUC, board education; BGENDER, board gender; ASIZE, audit committee size; AMEET, audit committee meetings; AINDEP, audit committee independent; AEXP, audit committee experience; Size, the natural logarithm of total assets; Leverage, total liabilities to total assets ratio; Liquidity, current assets to current liabilities ratio. ***, ** and * are the statistical significance levels at the 1%, 5% and 10% respectively.