Do Corporations’ Annual Reports Address Shareholders as Proprietors? Evidence from Saudi Arabia

This study empirically investigates whether shareholders of corporations that are publicly held and traded in Saudi Arabia’s capital market are engaged as the owners of the corporations in which they have invested their wealth? We conducted a content analysis of the annual reports and financial statements of 62 such corporations to discern the tone of the top management and board of directors. The study finds that the board of directors and top management both situate shareholders as owners. Financial statements and annual reports are prepared in line with the proprietary view of the firm. Nevertheless, there is a need to improve corporate reporting in Saudi Arabia in terms of company risks and related mechanisms. Because analysis was limited to 62 companies and no inferences were made regarding the texts, the findings must be generalized with caution. Saudi Arabia’s corporate reporting might be improved by addressing the risks companies face and related approaches to risk management. This study may be replicated for Saudi corporate reports in the years following the IFRS adoption with an eye for comparing the results of the two periods to further examine the nuances of corporate communications with shareholders