Saudi Arabias Capital Market Authority (CMA) is looking to improve corporate governance requirements for listed companies.
The regulator is in ongoing talks with companies about the introduction of stricter standards, such as the disclosure of the exact details of financial transactions in their quarterly statement, financial industry sources in the kingdom say.
They might introduce measures that will force companies to provide details such as the rates at which companies are lending, the tenors of loans and collateral that has been posted. At the moment, companies often only state that they have made a transaction without giving the details, says a source.
Various management teams have been asked for their input, although no concrete proposal has been put forward yet, adds another source.
While Saudi Arabias stock market is highly liquid, investors say a lack of corporate governance could hinder its ability to attract foreign investors once the kingdom decides to allow them to invest directly in its stocks.
There have been a few signs of progress as the Saudi Stock Exchange (Tadawul) prepares for the change. In February 2013, Mohammed bin Abdulmalik al-Sheikh, a former legal adviser for the Washington-based World Bank, was appointed president of the CMA. The move was followed by an announcement the kingdom was changing its weekend to Friday and Saturday to align its banks and businesses with the rest of the region.
Further improvements include measures to stabilise the market, such as the introduction of a new closing price calculation method and regulation limiting price swings of newly listed stocks upon the first few days of trading.
The CMA could not be reached for comment.