Corporate governance, transparency and performance: empirical evidence from UAE

This paper uses both the agency theory and the legitimacy theory to provide a complementary framework that links different patterns of disclosures (i.e. transparency) to corporate performance for a sample of 116 United Arab Emirates (UAE) listed firms between years 2008-2016. It investigates the relationship between corporate disclosures (i.e. transparency), organisational commitment to law, a set of governance mechanisms (namely, board size, CEO decision-making power, and foreign ownership) and corporate performance, while controlling for corporate specific characteristics such as size, type, age and leverage. The empirical results show that transparency indices have a puzzling pattern across different performance measures namely return on assets, asset turnover and organisational growth. For the non-financial sector, the results shows a positive significant association with return on assets and asset use, and a significant negative association with organisational growth. For the financial sector, the results show no association between transparency and performance measured by return on assets and asset use, and a negative association with organisational growth. The findings are important to regulators, investors, and researchers aiming at developing new policies that establish better regulatory infrastructure that increases investors confidence. The paper is one of very few studies that examine the association between corporate transparency and corporate performance in an emerging market economy, such as the UAE.