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The Effect of Capital Adequacy and Related Risk- Management Disclosure on the Performance of Commercial Banks Listed on the Saudi Exchange |
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PP: 1253-1268 |
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doi:10.18576/jsap/150506
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Author(s) |
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Doaa Ahmed Said Boreik,
Magdy Melegy Abdelhakim Melegy,
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Abstract |
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| This study examines whether the extent of capital adequacy and related risk-management disclosure (CARMD), as required and encouraged under Basel III Pillar 3, is associated with the performance of commercial banks listed on the Saudi Exchange. We hand-collect a 60-item disclosure index (35 qualitative and 25 quantitative items) from the notes to the financial statements, management commentary and Pillar 3 reports of all 10 listed Saudi commercial banks over 2021–2025 (50 bank-years). We relate the index to four performance measures (ROA, ROE, net interest margin and Tobin’s Q), controlling for size, leverage, governance quality, listing age and audit quality. Average disclosure is 64% of index items, and qualitative disclosure is more extensive than quantitative disclosure. CARMD is strongly and positively correlated with all four performance measures. After controlling for bank characteristics, however, CARMD is significantly associated only with net interest margin (B = 0.126, p = 0.024); the associations with ROA, ROE and Tobin’s Q are positive but not statistically significant. The results suggest that the main economic channel of disclosure in Saudi banks runs through funding costs and interest margins rather than through overall profitability or market valuation. The study provides recent evidence from a concentrated, Basel III-compliant emerging banking market, codes disclosure across three reporting channels jointly, and documents the gap between qualitative and quantitative Pillar 3 disclosure in Saudi banks. |
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