Assistant Accountant at Mefic Capital company Assignment

Assistant Accountant at Mefic Capital company - Assignment Example nd Corporate Governance Mechanisms in Saudi Arabia I: INTRODUCTION 1.1 Background In this study the capital structure and the mechanism of corporate governance in Saudi Arabia would be discussed. The motive behind choosing Saudi Arabia is that I did my internship from MEFIC Capital Saudi Arabia, so it would be an added advantage for me in investigating the financial environment of the country. Moreover, my major is in Finance, which is why I have chosen to focus and explore the capital structure and governance mechanism. Discussion on corporate governance and capital structure has always been a challenge for the academic researchers in finance and accounting. 1.2 Research Objective The objective of this research study has been developed keeping in mind the issues to be considered for the study, learning outcomes and stream of study. 1. To identify diverse capital structure in Saudi Arabia and their implications 2. To identify the relationship between diverse capital structure and cor porate governance in the firms in Saudi Arabia. 1.3 Research Question What is the relationship between the capital structure of firms in Saudi Arabia with the external and internal corporate governance? II: LITERATURE REVIEW In this research paper, the discussion would be related to the capital structure decisions of the firms in Saudi Arabia and its association to the external and internal corporate governance system, which is generally considered to be one of the primary drivers in decisions related to capital structures. Various researches prior to this suggest that the capital structure is based on corporate governance decisions. Theories suggest that the size of the firm and profitability is negatively related to the debt equity ratio of the firm. These findings are in line with the... Various researches prior to this suggest that the capital structure is based on corporate governance decisions. Theories suggest that the size of the firm and profitability is negatively related to the debt equity ratio of the firm. These findings are in line with the agency theory, transaction cost theory or pecking order theory. It was found that the there is a negative relationship between debt equity ratio and market to book ration in case of assets, which also reveals that it is conflicting with the agency theory. On the other hand, in European countries tangibility has a positive relationship with the choice of capital structure and it is consistent with the agency theory. This study aims at discussing and analysing the capital structure with regards to corporate governance in Saudi Arabia. A quantitative analysis would be done to identify the relationship between capital structure and corporate governance, so as to identify an accurate association between these two major aspec ts in financial environment of Saudi Arabia. For this purpose a multiple regression analysis would be done for this study. A sample of 5-8 firms in Saudi Arabia in the securities market would be considered to conduct the study.