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Corporate Governance and Informational Disclosure on Internet Financial Reporting:

The Saudi Arabia Evidence

Research Proposal

Title: Corporate Governance and Informational Disclosure on Internet Financial Reporting: The Saudi Arabia Evidence

Topicality and Aim of the Study

In the modern corporate behaviour, transparency in financial reporting is a critical business aspect to companies, shareholders and regulators. Corporate reporting allows existing shareholders and potential investors to analyse the data provided on a firm’s annual reports. In addition, it gives them an opportunity to research the potential of investment in the firm based on its financial strengths, weaknesses, threats and opportunities within the existing business environment. In case the above-indicated process is followed with strictness, investors gain awareness of the state of affairs within the firm, which enables them to make informed decisions on investments. Maintaining transparency in the corporate reporting is captivating for corporate regulators as well. In this way, these officials find it easier to not only detect illegal behaviours, but also protect the investors’ interests. Moreover, it is worth noting that organisations themselves gain advantages from the enhanced corporate governance (CG) through the transparent reporting. In particular, they are able to decrease expenditures through reduction of informational gaps within the prevailing investor-company relationship.

Research Project

The proposed study is a continuation of a personal research and professional practical experience aimed at achieving an in-depth understanding of the existing correlation between corporate governance and transparent disclosure of the internet financial reporting (IFR) in Saudi Arabian companies. The afore-stated relationship is explored to clarify the reliability of possible impacts of corporate governance techniques on the disclosure transparency in IFR. Additionally, this investigation will attempt to provide details on “how” and “by what means” the CG can affect the process analysed. Such components as shareholders’ rights, ownership structure, board composition and audit committee characteristics will be taken into account to measure the CG features, procedure and outcomes while conducting the research.

Main Goals of the Research

The central focus of the research is to study the corporate governance characteristics within Saudi Arabian companies in three dimensions: (a) ownership structure of the companies under analysis; (b) ownership board structure; (c) total debt over the total asset. As a result, it will be possible to clarify the effectiveness of IFR for the above-indicated stakeholders –shareholders/investors, companies, and regulators – based on the evidence collected from companies in Saudi Arabia.

The Review of Academic Literature

Corporate governance includes the set of rules and practices in the organisation that are executed to support the balance of all shareholders’ interests in order to ensure the sufficient return-on-investment (ROI) measures. To be involved in the CG process, numerous parties use contractual agreements. Overall, CG is based on several related contents. This section will pay a great attention to three principle parties of the CG process: shareholders, corporate directors, executive managers (Shleifer & Vishny, 1997).

A sufficient number of academic sources have considered the effects of CG mechanisms and the disclosure of corporate organisations in numerous dimensions, involving disclosure of quality, timing, and tendency in corporate finance (agency theory) among other issues. Rahman (2012) has indicated that the use of the internet as reporting tool refers to the firm’s high quality since it presents itself as up-to-date and advanced technique compared to traditional firms (p. 1). As a result, companies get particular benefits from the process. For instance, it leads to an enhanced market exposure. Ojah and Mokoaleli-Mokoteli (2012) have researched the interconnectedness between IFR and CG processes on the international level. The scholars conclude that it is possible to eliminable several agency problems, especially in terms of possibility to assure corporate shareholders that “managers’ decisions are value-enhancing rather than self-serving” (Ojah & Mokoaleli-Mokoteli, 2012, p. 69).

The World Wide Web (or the Internet) is a common and contemporary technical advancement applied by numerous individual investors when collecting information on the existing investment opportunities and even trading shares (Spiro & Baig, 1999). Additionally, firms use such internet tools as websites in order to share and communicate their financial information or improve communication with their investors (Ashbaugh, Johnstone & Warfield, 1999). Furthermore, Hodge, Kennedy and Manies (2004) have stressed that the transparency of the internet information disclosure has become a significant facilitator influencing the investors’ decisions. With respect to Sarbanes-Oxley Act (SOX) of 2002, a sufficient number of barriers to non-effective and non-transparent CG have now been outlined in the American business law. Consequently, the statute has encouraged companies to put an emphasis on the corporate transparency in terms of financial reporting as well as the quality of their disclosures.

Research Questions

The paper will achieve its objectives by limiting itself to answering specific research questions, which are conventionally divided into four groups: (a) general; (b) fundamental reporting; (c) corporate social responsibility reporting; and (d) corporate governance reporting elements.
General research questions may be listed as such:
• Does the firm have a specified website?
• When the organisation has not launched a primary website yet, are there secondary websites able to present the necessary financial information about it?
• In case the firm does have its own website, does it have annual reports/interim reports/other financial data documents available on this web-source?
• Is there a link providing access to a list of analysts covering the company’s financial performance?
With the help of the above-indicated questions, it is possible to ensure the on-line presence and disclosure of IFR on the firm’s operations. To obtain the information required, the researcher will explore data accessible on the organisation’s primary website. If there is no such a source available, financial reporting within secondary websites will be analysed.
Fundamental reporting elements include the next:
• Are the firm’s segmental data depicted in annual reports?
• Does the organisation make information with regard to its subsidiaries, joint ventures, affiliates available?
• Is it possible to access the Chief Executive Officer’s statements as part of its financial documentation in the website?
• Are the company’s audit reports available online?
• Does the firm make its Income/ P& L statements accessible via the World Wide Web?
• Can the company’s changes statement concerning shareholder’s equity be researched in the prime/secondary website?
• Does the organisation have an online Balance Sheet?
• Is there a web-based Cash Flows statement of the company?
• Are there online notes to the statements with respect to the given organisation?
• Does prime/secondary websites contain any stock data on the company analysed?
• Is any dividend information accessible through the internet?
• What accounting standards have been used by the firm investigated concerning its consolidated accounts?

Corporate social responsibility (CSR) reporting elements are investigated by the means of such questions:
• Are there online financial reporting data available in terms of the number of employees, working conditions and value-added statements and so forth?
• Does the company’s IFR highlight the environmentally friendly policies?
Corporate governance reporting elements incorporated into the IFR will be assessed in accordance with questions listed below.
• Is there Director’s remuneration available on the prime/secondary website?
• Are any CG policies by the company under analysis disclosed online?
• Are firm’s directors biographies provided in the internet sources?
• Is there any information accessible online with respect to the company’s Corporate Governance committees?
• Can any committee charters’ data be researched online?
• Is there a web-based code of conduct provided by the company?
• Is it possible to access an online version of an Article of Incorporation of the given organisation?
• Can any risk management policies be investigated through the internet tool?

All research questions previously outlined will be analysed through the lens of the qualitative features of financial data.

Research Methodology

Overall, the given paper will follow the qualitative study requirements, but it will also involve a practical research component aimed at exploring the questions as discussed in the previous section and measure the CG characteristics throughout Saudi Arabian companies. The research will be founded on the analysis of Saudi Arabian firms’ IFR information available online. It is to be an empirical inquiry focused on a contemporary phenomenon – internet financial reporting – within its real-life context. The size of the sample will be specified in the process of data collecting. The research methodology will be organised in such a way to provide a detailed description of the web-based data on firms’ financial state and activities. This will be ensured in order to provide a thorough argumentation focused on the thesis statement of this research and clarify the IFR effectiveness for the stakeholders stated and outline possible improvements in the Saudi Arabian business context. More so, it will be possible to compare findings of the previous researchers in the chosen field in terms of the international or country-specific characteristics of the IFR to arrive to the generalised conclusions.

Key Problems for Investigation May Include:

1) Corporate goverance in general, the informational disclossure and the corelation between two concepts.
2) Investigation related to the level of information demand with regard to the CG on the grounds of Saudi Arabia.
3) The principle information source on the core elements of the research available for both shareholers and investors.
4) Whether there is a connection between the CG concept and the transparency of IFR in the firms within the country chosen or not?
5) The exploration of the either positive or negative impacts of the managerial ownership proportion on the transparency of IFR in Saudi Arabian companies.
6) The clarification in terms of whether the block ownership structure is able to cause negative or positive effect on the IFRtransparency.
7) Understanding negative/positive consequences of the data released via the IFR on the company’s size, profitability, growth as well as negative relation to level of asymmetric information throughout the corporate organisations in Saudi Arabia.

Some Concerns Related to the Research Questions that Can Arise:
a) Regardless the significance of CG, there is a limited number of academic studies regarding the problem analysed taking into account the illustrative material from both developing countries in general and Saudi Arabia in particular.

b) Applying improper proxies can lead to false research results.
c) Inappropriate data declaration by the firms involved in the IFR process.

The Set of Methods Applicable for the Exploration

All in all, methodology refers to the research toolkit able to assist in the execution of the intended investigation. In other words, the researcher will operate the variables involved in the study – financial data on firms available online, instruments necessary to collect the data and those to process the information obtained. Therefore, the central used in the scope of the given project will be the researcher’s observations. The information acquired will be critically evaluated and compared to the findings of the previous studies on topic (critical analysis). The results of observation and analysis will be described in detail. The researcher will also explain variation in the textual data obtained (e.g. why and what components of necessary data are highlighted on the web, how it affects shareholders’ activity and so forth) and specify the relationships between information available and stakeholders’ decision-making.

Potential Outcomes of the Given Study

The researcher will focus on a detailed analysis of information obtained and research methods applied in order to explain the hypotheses stated. The core purpose of the given exploration is understanding the relationship between disclosure of information and the CG level within Saudi Arabian companies.
The answers to the research questions will be gained by the means of the critical analysis. The results obtained will assist in identifying the level of consistency/inconsistency with the eaarlier scholarly sources examining the subject of the given research.
As a result of the study conducted, it will be possible either confirm or refute the hypotheses outlined. The transparency in terms of corporate reporting (CR) is vital to firms, shareholders, regulators.

In case CR process is well-organised, investors and shareholders will be given an opportunity to find all necessary data about an intended company and research its prospects. Furthermore, the clearer transparency will allow investors to make well thought out and informed decisions on investment. Additionally, this process will be beneficial to regulators. To be more precious, they will be able to detect illegal behaviours easily and protect the investors’ interests. Besides, corporate organisations will get advantages as a result: they will be enabled with a possibility to reduce their capital because of decrease of the asymmetry information between companies and investors. The study outcomes will be of great help in finding answers to research questions set.

Afterward, it will be possible to clarify consistency/inconsistency of the findings of this research as compared to the previous studies within the chosen scientific field with respect to the relationships between the disclosure of information on Saudi Arabian Company’s website and the level of corporate governance. The perspective highlighted will be supported by the evidence from the four hypotheses considered.

Sources for Obtaining Information

The researcher is about to consult a wide range of sources of information:
 Journals in-print (for instance, Update, Program, Library Trends, Library Review);
 Web-based gateways and databases (like OCLC, BIDS, OMNI, BUBL);
 Standard-making and regulatory bodies (such as UKOLN, W3C, SO, JISC);
 Journals available online (for example, Ariadne, Biblio-Tech Review);
 Publications by the government and other regulators (HESA, HEFCE, RNIB, etc.);
 Monographs and other large scientific works concerning library management, tendencies in higher education in the field and e-learning;
 Texts for referencing, such as ONS publications.

The Outline of the Research Progression

 Year one: The period will be marked with such activities as research training, the review of the academic sources, and assistance in refining of the major research questions. Additionally, the investigator will ensure establishing contacts with disability support staff and e-learning personnel within other facilities.
 Year two: The time frame will be devoted to the piloting and development of techniques and methods that are likely to be applied in order to conduct the given study.
 Year three: The principle empirical phase will be performed.
 Year four: During this period, supplementary review of the peer-reviewed sources on topic as well as their analysis will be held.
 Year five: The research conducted will be written, edited, and proofread.


Ashbaugh, H., Johnstone, K., & Warfield, T. (1999). Corporate reporting on the internet. Accounting Horizons, 13(3), 241-257.
Ho, S. S., & Wong, K. S. (2001). A study of the relationship between corporate governance structures and the extent of voluntary disclosure. Journal of International Accounting, 139-156.
Hodge, F., Kennedy, J., & Manies, L. (2004). Does search facilitating technology improve the transparency of financial reporting? The Accounting Review, 79(3), 687-703.
Ojah, K., & Mokoaleli-Mokoteli, T. (2012, April-June). Internet financial reporting, infrastructures and corporate governance: An international analysis. Review of Development Finance, 2(2), 69-83.
Rahman, Z. D. (2010). The impact of internet financial reporting on stock prices moderated by corporate governance: Evidence from Indonesia capital market. Retrieved from Social Sciences Research Network Database
Securities and Exchange Commission (SEC). (2003). Final rule: Disclosure required by Sections 406 and 407 of the Sarbanes-Oxley Act of 2002. Release No. 33-8177. Washington, DC: SEC. Retrieved from
Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52, 737-783.
Spiro, L., & Baig, E. (1999). Who needs a broker? Business Week, 112-117.
Strine, L. E. (2006). Toward a true corporate republic: A traditionalist response to Bebchuk’s solution for improving corporate America. Harvard Law Review, 119, 1759-1783.

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