Market Risk Disclosures, Corporate Governance Structure and Political Connections: Evidence from GCC Firms

The aim of this study is to examine the association between market risk disclosures and the strength of the corporate governance structure of Gulf Cooperation Council (GCC) countries? financial firms. In addition, we will investigate the joint effects of political connection, in the form of royal family membership on the board of directors, and corporate governance structure on market risk disclosures. The GCC provides an interesting and natural context for studying market risk disclosure. Many of the GCC listed firms have at least one ruling family member on the board of directors (TNI Survey 2008). For instance, in the United Arab Emirates (UAE), 56 directors from 101 listed firms in 2008 are ruling family members (TNI Survey 2008). Furthermore, in Qatar, 78 (24%) of all listed companies have ruling family members on their boards in 2008. Similarly, in Kuwait and Oman, there are 45 (21%) and 31 (26%) listed firms with ruling family members on their boards in 2008, respectively. In addition, the GCC has a different institutional environment from developed countries, in terms of ownership structure, market development, and regulations. There is an increasing desire in the GCC to improve corporate governance regimes in line with the rapid economic growth of the region, and from the increasing demand of regulators and international institutional investors for greater transparency and accountability. In response, the GCC has strengthened its regulatory and financial institutions and adopted more business environment reforms. These features of the GCC are expected to bring new and valuable insights to the association between market risk disclosure and corporate governance structure.