The role of corporate governance in enhancing the financial efficiency of the Saudi capital market (Tadawul) during the period (2020–2025)

Abstract

This study examines the role of corporate governance (CG) in enhancing the financial efficiency of the Saudi Capital Market (Tadawul) between 2020 and 2025ma period characterized by global "polycrisies," including the COVID-19 pandemic and surging global inflation. Adopting a descriptive-analytical approach combined with time-series statistical analysis (Pearson Correlation and Simple Linear Regression), the study utilizes Agency Theory and Signaling Theory as its theoretical framework. The results indicate that CG acted as a fundamental driver for institutional growth and market resilience. Statistical findings revealed a strong positive correlation (r=0.915) between governance compliance and market deepening. Regression analysis confirmed that CG compliance explains 70.9% of the variance in market liquidity (R²). The study concludes that legislative stability and "Agile Governance" attracted significant institutional foreign investments, reaching 4.15%, thereby reflecting high operational and pricing efficiency despite global economic headwinds. Corporate governance frameworks successfully maintained high operational and pricing efficiency in Tadawul despite severe global economic headwinds. The findings suggest that regulators should transition from voluntary to mandatory ESG reporting and continuously adapt governance frameworks for the Parallel Market (Nomu) to sustain foreign capital influx and market deepening.