Market risk disclosures, corporate governance structure and political connections: evidence from GCC firms

Abstract

This paper investigates the joint effect of political connections, in the form of the royal family member on board, and corporate governance on the market risk disclosures of the Gulf Cooperation Council (GCC) financial firms from 2007 to 2011. Previous research suggest that politically connected firms reduce the level of transparency in the GCC. However, we find that better corporate governance improves transparency and can be used as an effective tool in curbing the potentially adverse impact of politically connected board members on firms’ transparency. Our results have important implications for policy makers and can be generalized to other emerging markets.