Corporate governance in Gulf Cooperation Council (GCC) countries : ownership structure, executive compensation and firm performance

Gulf Cooperation Council (GCC) countries showed a remarkable economic growth in the past decade due to being a major oil exporter, attracting significant foreign investment, becoming a major global trading partner and integrating further to the global economy. These developments have resulted in the need to institute advanced corporate governance norms for GCC companies. However, corporate governance systems and practices in the GCC countries are of recent origin and, albeit the importance of corporate governance practices in transforming GCC economies, there is a dearth of academic research on corporate governance in GCC countries. Our motivation for this research is the increasing importance of GCC economies within the world economy and the lack of research on corporate governance mechanisms in these countries. We believe we make a significant contribution to the existing research by providing comprehensive empirical insights into different aspects of corporate governance practices and firm performance in the GCC countries. In particular, our focus is on how corporate performance is affected by ownership structure and executive compensation. We test these relationships using a uniquely constructed and hand collected data of 349 listed companies in Kuwait, Saudi Arabia, Oman, Qatar and United Arab Emirates for the years between 2006 and 2011.We start by formulating a theoretical base for the study through a discussion on how major theories of corporate governance evolved over time and reviewing the state of empirical research in corporate governance in general as well as in the context of the GCC region. We find that the corporate governance practices and standards prevailing in the GCC countries are not comparable to those followed in other developed countries because of many challenges identified by previous research. We also find that there is a large scope for the implementation of globally comparable corporate governance practices in the GCC countries.In our first empirical analysis, we investigate the ...