Financial reporting and corporate governance disclosures of Saudi Essay

Financial reporting and corporate governance disclosures of Saudi banks - Essay Example The intention of this study is the corporate governance as â€Å"the set of institutions that determines how the residual claims are distributed between those who have participated in the generation of profits†. In respect of the corporate reproting Shleifer & Vishny provides a clear statement to elaborate corporate governance as â€Å"a form in which stakeholders make sure they will obtain a return of their investment†. This implies that companies need to develop and implement corporate governance policies and practices to ensure that shareholders can have the confidence in the decisions made by managers and expect returns on the investment. Overall good corporate governance could be viewed as â€Å"the subset of those practices that are welfare enhancing for the economy†. The emphasis on corporate governance took its lead when in the early 2000 the US corporate sector was hit by a series of major corporate scandals involving management and those who were respon sible for ensuring integrity in the financial reporting. These corporate failures were mainly argued as a resultant of not enough supervision and regulatory role played by the government. The accounting profession was also blamed for having weak conceptual framework allowing managers to manipulate their financial reporting in favor of attracting investment from shareholders and eventually collapsing due to unveiling of major frauds involving external auditors assisting managers to cover up the internal mismanagement of financial reporting.