Corporate Governance and Foreign Portfolio Investment in Saudi Arabia

A corporate governance system has been designed to ensure efficient operations of companies on behalf of share-holders. Good practices of corporate governance principles and high protection of investors would attract foreign portfolio investment. This study aims to investigate the effect of corporate governance mechanisms (i.e. board size, board independence, audit committee size, audit committee independence and firm age) on foreign portfolio investment in Saudi listed firms for the year 2010. This study is significant due to the lack of empirical evidence regarding the field of corporate governance and foreign portfolio investment in Saudi firms since the Saudi code of corporate governance has been enacted in the late 2006. The results of the study show that board independence and audit committee independence are associated with foreign portfolio investment in Saudi listed firms. However, the corporate governance mechanisms, i.e. board size, audit committee size and firm age had no impact on foreign portfolio investment