Corporate governance relationship to agency costs and performance: Evidence from the Saudi Market

Abstract

Existing empirical research provides mixed evidence with respect to the relationship between corporate governance and agency costs and firm performance. In this context, this study aims to examine whether the size of the board, its independence levels, its meetings, the ownership levels of both the chairman and the executive’s team are related to agency costs and the performance of the firm. To achieve this goal, several hypotheses are developed and examined using data drawn from the Saudi market covering the period 2017-2019. The results suggest that that the size of the board is positively related to agency costs, while its negatively related to performance. Further, there is a positive relationship between board intendance and agency costs, and a positive relationship between the chairperson ownership and agency costs. Collectively, these results enrich corporate governance literature by providing new empirical evidence to the ongoing debate on the relationship between corporate governance characteristics and agency costs and firms performance.