Government-Controlled Companies and Audit Committee Effectiveness: An Empirical Study on Saudi Stock Exchange

This study attempts to examine whether ownership of government-controlled corporations and audit committee effectiveness are related. The population of this study is 431 listed manufactured firms in the Saudi Stock Exchange (Tadawul) for the period 2012–2019 that published their financial and annual reports for the period 2012–2019. This population criterion is based on considerations that manufacturing companies listed on Tadawul have publicly accessible data and they have greater obligations to implement corporate governance code. Using the complementary hypothesis, this study predicts that there is a positive relationship between the ownership of government-controlled companies and audit committee effectiveness. The Pooled OLS regression shows that government-controlled companies’ ownership is positively associated with audit committee effectiveness. Our study also indicates that ownership of government-controlled companies as a governance monitoring mechanism becomes more effective as it is combined with audit committee effectiveness which is another governance monitoring mechanism. The results of this study provide insightful evidence to policymakers at the company and country levels on the relationship of government-corporate ownership and audit committee effectiveness.