The nexus between corporate governance improvements, corporate investment and value creation: Evidence from Shariah-compliant companies

Abstract

This study examines the role of corporate governance in enhancing the positive impact of corporate investment on value creation in non-financial firms listed on the Saudi Stock Exchange. It specifically explores how governance mechanisms such as ownership structure and board structure influence investment-driven value creation. The study analyzes 100 Shariah-compliant firms from 2020 to 2023 using multivariate regression techniques to test the proposed hypotheses. The results indicate that strong corporate governance significantly enhances the effectiveness of corporate investments in generating value. Firms with concentrated ownership, larger boards, CEO duality, and independent directors experience improved investment outcomes, suggesting that governance mechanisms facilitate better decision-making and resource allocation. Effective corporate governance plays a crucial role in maximizing value creation through strategic investment management. Strengthening governance structures enables firms to optimize investment decisions, leading to sustainable growth. The study provides valuable insights for companies, investors, and policymakers on refining ownership structures and board characteristics to enhance investment efficiency and long-term value creation. It underscores the need for regulatory frameworks that promote strong governance practices.