Emerging Market of Saudi Arabia - Research Proposal Example

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The Kingdom of Saudi Arabia was founded in the year 1932 and is the largest country in the Arabian peninsula. Besides, it is also the biggest economy in the G.C.C. region and have undergone tremendous transformations in the recent years from being a agricultural dominant society to global economic power equipped with all the modern infrastructural facilities (Research and markets, 2009)…
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Emerging Market of Saudi Arabia
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Download file to see previous pages The initiates taken by both the government and the private sector players have promoted the investment opportunity in Saudi Arabia by creating effective partnerships with the Saudi Businessmen in effort to bring newer industries or modern technology to the country. Added emphasis is being given on attracting the infrastructure promotion and power generation but the investments made in these sectors are yet to exhibit the financial attractiveness in it. The existing capital investment from foreign institutions specifies three conditions (U.S. department of Commerce , n.d. ),
The Saudi Arabia is a rapidly growing region among Arab countries and hence the empirical evidence gained from the choice each firms make on their capital structure (Leverage ratio) could be used to gauge their financial performance in the emerging scenario. This aspect as been considered on the reason that detailed and more exhaustive studies are needed to make valid conclusions on the best capital structure for any company (Rajan & Zingales, 1995, Harris and Raviv, 1991). Further, a few researchers have alos raised an opinion of the influence of organizational characteristics on the corporate leverage level, thus making this research more valid (Fan et al., 2004; Hall et al., 2004; De Jong et al., 2007). Thus, in order to understand the better performance of business organizations in the emerging market the criteria it is proposed to adopt the debt / equity ratio as the most appropriate parameter. Further, Saudi Arabia has a highly conservative financial market where the interest from debts is considered as illegal. Thus this creates a situation of very low leverage. Thus as companies have decided to undergo the process of financial planning the present approach would be turned from the debt to be linked more to equity approach. Thus this study could open newer vistas of academic research in the area of financial planning for the companies and proposing better investment options.

The topic of capital structure is very important considering the potential of investment that the Saudi Arabian companies claim to have. The leverage signifies the amount of the debt securities the is issued by an establishment in event of the capital requirement. Hence, the extend of leverage that the firm carries in its capital structure is very important to understand the exact picture of financial performance. Thus the uncertainty of future profitability would loom large as the company would have to make regular interest payments besides the principal repayment. While the increased use of debt would result in a higher value of debt to assets ratio which explains the proportionate amount of fund the firm have borrowed with respect the assets owned by it. Thus the leverage or debt/equity ratio highlights the profits for a firm with positive earning while exposing the loses for a firm with negative records in earning. Thus in the research would help to ...Download file to see next pagesRead More
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