Strengthening financial risk disclosure through governance committees to advance sustainable corporate practices in Saudi financial firms

This study investigates the impact of the governance committee (GC) on financial risk disclosure (FRD) in Saudi financial firms (FFs) from 2019 to 2021 (117 firm-year observations). The research fills a gap in knowledge by exploring the role of GC in moderating the association between board independence, board size, and board meeting frequency in FRD. Findings reveal that while individual board characteristics do not directly impact FRD, the presence of a GC has significant effects. Through Cross-sectional time-series FGLS regression and Random-effects GLS regression analysis, it was determined that GC moderates the relationship between FRD and factors such as board independence and meeting frequency. In FFs with a GC, board independence and size significantly influence FRD, unlike in FFs without a GC. The findings align with the "substitution effect" hypothesis. In this context, a more effective GC may act as a substitute for the monitoring role typically fulfilled by independent directors, thereby reducing the need for extensive FRD. Moreover, the results indicate that companies with a GC tend to disclose more financial risks when their boards hold frequent meetings.