AbstractThis thesis uses a new institutional sociology perspective to examine financial risk management practices adopted by Saudi listed companies and identify the factors that influence these practices. In Islamic shariah law, using conventional derivatives is prohibited and so this thesis aims to determine if there is an institutional logic within the organisational field and a community of practice that results from networks of actors. The study also, examines the effect of different types of coercive, mimetic and normative isomorphic pressures on the adoption of risk management practices by Saudi listed companies. For this purpose, two pieces of empirical work are employed, (i) semi- structured interviews; and (ii) statistical tests. The interviews were held with 22 treasury managers of Saudi listed companies in 2011 to explore their perspectives of financial risk management practices. The second empirical work uses binary logistic regression to test the factors that might affect the adoption of financial risk management practices of 132 listed companies using publicly available data in 2011. Most of the previous studies relating to financial risk management practices have been undertaken in developing countries Therefore, there is a need to expand the scope of existing research by investigating such practices in Islamic countries to test the relevance of existing theory there and to enrich the risk financial management literature.
This thesis investigate 12 factors: (the influence of political factors, cultural factors, and the competitive environment in Saudi society as well as nine institutional characteristics, comprising: firm size; profitability; leverage; being an Islamic company; auditor type; industrial sector; ownership structure; number of subsidiaries and exports) to identify to what extent they affect the financial risk management practices in the organisational field.
The main findings indicate that Saudi listed companies hedge more interest rate risk than other financial risks, using conventional derivatives contracts which are prohibited in Islam. This finding is surprising in a country such as Saudi Arabia that is regulated and dominated by Shariah law. The political, cultural and competitive environments also affect the financial risk management practices in the organisational field. In addition, firm size in Saudi Arabia is related to interest rate risk and foreign exchange rate risk; also more leveraged companies and companies audited by Big-4 firms hedge interest rate risk. In addition, Islamic companies depend on Islamic derivatives that are available to hedge financial risk. Furthermore, the profitability of companies, industrial sector and their ownership structure has little influence on the risk management practices in Saudi listed companies. Finally, having subsidiaries and exports also affects hedging practices.
It seems that actors are involved in similar networks and that considerable boundary-spanning takes place across these networks especially by treasury managers. This results in several different communities of practice with different organisational logics. These practices reflect coercive, normative and mimetic institutional isomorphic processes.
|Date of Award
|Christine Helliar (Supervisor) & Alison Fox (Supervisor)
- Risk managment
- internal control