Following the introduction of the Saudi Vision 2030, diverse developments have been considered concerning corporate governance as an effort to open Saudi Arabia's economy to the world. Identifying the significance of attracting foreign investment is considered an approach to accomplish one of the vision's targets. The objective of this study is to investigate the impact of improved corporate governance policies on the magnitude of foreign investment. Regression analysis was employed using the data of 153 listed companies in the Saudi Stock Exchange (Tadawul) from 2015 to 2019 to examine the effect of three corporate governance indicators on foreign investment. Specifically, ownership structure was represented by institutional ownership, ownership concentration and managerial ownership. Board composition was identified by board size and independence. Executive pay was measured by the total top executive pay and the presence of long-term incentive plans (LTIPs). Findings indicated that foreign investment is positively associated with ownership concentration, board independence and the presence of LTIPs in compensation packages. A negative and significant association was found with institutional ownership and managerial ownership.
This research aims to examine whether corporate social responsibility (CSR) and corporate governance (CG) attract foreign investors as key indicators of a firm’s sustainability. By adopting both stakeholder theory and legitimacy theory, it is assumed that a firm could build trustworthiness and legitimacy with its stakeholders by enhancing its environmental, social, and governance (ESG) performance. Using a sample of 110 firms from the Saudi stock market from different industries, this study employs both OLS and System-GMM estimation to test the effect of both ESG performance and CG on foreign investment in Saudi Arabia. The findings indicate that ESG performance positively affects foreign investment. Additionally, it is found that the corporate governance score has a greater effect than social and environmental scores. These empirical findings suggest that companies in Saudi Arabia should adopt global schemes to improve ESG performance to maximize the share of foreign investment, thus boosting the country’s economy and increasing the level of competitive advantages and sustainability.
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