Search Results (47)

This study investigates the impact of environmental, social, and governance (ESG) disclosure on value creation in a balanced panel of 100 non-financial Sharia-compliant firms listed on the Saudi Stock Exchange over the period 2014–2023. The analysis employs a combination of econometric techniques, including fixed effects models with Driscoll–Kraay standard errors, Pooled Ordinary Least Squares (POLS) with Driscoll–Kraay standard errors and industry and year dummies, and two-step system generalized method of moments (GMM) estimation to address potential endogeneity and omitted variable bias. Value creation is measured using Tobin’s Q (TBQ), Return on Assets (ROA), and Return on Equity (ROE). The models also control for firm-specific variables such as firm size, leverage, asset tangibility, firm age, growth opportunities, and market capitalization. The findings reveal that ESG disclosure has a positive and statistically significant effect on firm value across all three performance measures. Furthermore, firm size significantly moderates this relationship, with larger Sharia-compliant firms experiencing greater value gains from ESG practices. These results align with agency, stakeholder, and signaling theories, emphasizing the role of ESG in enhancing transparency, reducing information asymmetry, and strengthening stakeholder trust. The study provides empirical evidence relevant to policymakers, investors, and firms striving to achieve Saudi Arabia’s Vision 2030 sustainability goals. Full article

This study examines stock market reactions to female board appointments among 34 publicly listed companies in Saudi Arabia between 2021 and 2024. We employ a multi-method approach covering 36 announcements. Our primary methodology is an event study, which we complement with two distinct robustness checks: the Local Projections (LP) method to capture the evolving nature of market responses and the Quantile-on-Quantile analysis to investigate how market conditions interact with the three phases surrounding the event—the anticipation period before the appointment, the appointment event itself, and the post-appointment adjustment period. This comprehensive methodological framework allows us to capture the immediate market response to appointment announcements and the longer-term implications for firm performance while accounting for various econometric challenges inherent in financial market data. Our findings reveal a negative market reaction that gradually intensifies, becoming marginally significant by the tenth trading day. This pattern suggests that investors in the Saudi market may initially view female board appointments with skepticism, potentially reflecting uncertainty about the impact of gender diversity in a traditionally male-dominated business environment. Furthermore, the evolution from 2021 to 2024 suggests a market that is progressively developing more sophisticated frameworks for evaluating female board appointments. Rather than exhibiting a monotonic trend toward either increasingly positive or negative reactions, the market appears to be engaging in a learning process characterized by periodic reassessments. Moreover, our results indicate that while the immediate event and anticipation phases yield mixed impacts across the return distribution, the adjustment period exhibits a robust and significantly negative interaction with market returns. These findings suggest that market overreactions, particularly during bullish periods, contribute to a pronounced correction effect following female board appointments. Full article

This research investigates the effect of board characteristics on environmental, social, and governance (ESG) disclosure among firms listed on the Saudi Stock Exchange (Tadawul) from 2021 to 2023. Motivated by the global shift toward sustainable development and the Saudi Vision 2030 agenda, this study examines how board size, gender diversity, independence, expertise, and compensation impact ESG disclosure practices. Drawing on stakeholder and agency theories, the regression model uses a sample of 78 Saudi-listed companies. ESG disclosure is measured using a content analysis-based checklist that conforms to international and Saudi ESG reporting frameworks. The findings indicate that background and skills, female representation, and compensation positively correlate with ESG disclosure. Conversely, board size and independence do not show significant relationships. The results highlight the pivotal role of board composition in emphasizing business practices for sustainability in emerging markets, particularly within the unique institutional setting of Saudi Arabia. The study contributes to the growing body of ESG literature by offering factual proof from an under-researched context and practical ramifications for investors, legislators, and business executives, as well as seeking to enhance transparency and accountability through effective board governance. Full article

This study explores how corporate social responsibility (CSR) disclosure contributes to sustainable value creation by enhancing intellectual capital (IC) and investigates the moderating role of institutional ownership (IIOW) in this relationship. Using a panel dataset of 828 firm-year observations from non-financial Saudi companies listed on the Saudi Stock Exchange (Tadawul) between 2016 and 2021, the analysis applies feasible generalized least squares (FGLS) regression to test the proposed relationships. The findings reveal a significant positive association between CSR disclosure and IC, underscoring the strategic importance of CSR in building intangible corporate assets. Moreover, IIOW strengthens this association, suggesting that IIOW plays a critical role in promoting sustainability-oriented practices. Robustness checks using alternative proxies and estimation techniques confirm the validity of the results. This study provides novel empirical evidence from Saudi Arabia, contributing to the CSR and IC literature in emerging markets and offering practical insights for policymakers, investors, and corporate leaders aiming to foster long-term organizational resilience. Full article

This paper examines the impact of various uncertainty channels on stock market returns in Saudi Arabia, with a focus on the Tadawul All Share Index (TASI). It examines factors such as Saudi-specific Geopolitical Risk, Global Oil Price Uncertainty, Climate Policy Uncertainty, and U.S. Monetary Policy Uncertainty. Using monthly data from November 1998 to June 2024 and the Local Projections (LP) methodology, the study examines how these uncertainties impact market returns across various time horizons, taking into account potential structural breaks and nonlinear dynamics. Our findings indicate significant variations in the market’s response to the uncertainty measures across two distinct periods. During the first period, geopolitical risks have a strong positive impact on market returns. Conversely, the second period reveals a reversal, with negative cumulative effects, suggesting a shift in risk–return dynamics. Oil Price Uncertainty consistently exhibits a negative impact in both periods, highlighting the changing nature of oil dependency in the Saudi market. Additionally, Climate Policy Uncertainty is becoming more significant, reflecting increased market sensitivity to global environmental policy changes. Our analysis reveals significant asymmetries in the effects of various uncertainty shocks, with Monetary Policy Uncertainty exhibiting nonlinear effects that peak at intermediate horizons, while commodity-related uncertainties exhibit more persistent impacts. These findings, which remain robust across various tests, offer critical insights for portfolio management, policy formulation, and risk assessment in emerging markets undergoing substantial economic changes. Full article

This study employs asymmetric quantile regression to investigate the asymmetric impact of WTI crude oil prices and economic policy uncertainty (EPU) on stock market returns from May 2014 to December 2024 in oil-importing (China, India, Germany, Italy, Japan, USA, and South Korea) and oil-exporting (Saudi Arabia, Russia, Iraq, Canada, and the United Arab Emirates) countries. The findings reveal that an increase in oil prices significantly impacts the returns of all countries. For oil-importing countries, an increase in oil prices consistently exhibits a positive impact, with insignificant effects in lower and medium quantiles and significant effects in higher quantiles. Conversely, a decrease in oil prices generally decreases stock market returns across all quantiles. This study offers valuable insights for investors to manage risks and improve the predictability of oil price fluctuations. It also provides strategies and policy implications for capitalists and decision-makers. By addressing contemporary issues and using up-to-date data, the study supports financial institutions and portfolio managers in formulating effective strategies. Full article

This study endeavors to explore the shock-transmission mechanism between Trade Policy Uncertainty (TPU) and the volatility inherent in the Gulf Cooperation Council (GCC) Islamic stock markets by employing the novel Quantile Vector Auto Regression (QVAR) with “Extended Joint” and “Frequency” domain connectedness technique. Overall findings indicated a U-shaped pattern in the shock-transmission mechanism with the higher TPU shocks transmitted towards Islamic stock market volatility at the extreme quantiles and in the long term. The “Extended Joint” QVAR connectedness approach highlights that, in bearish and moderate-volatility conditions (τ = 0.05, 0.50), diversifying portfolios across less shock-prone equity markets like Qatar and UAE can mitigate risk exposure to TPU shocks. Specific economies receiving higher TPU shocks, like Bahrain, Kuwait, and Saudi Arabia, should implement strategic frameworks, including trade credit insurance and currency hedging, for risk reduction in trade policy shocks during the bearish and moderate-volatility conditions. Conversely, Qatar and Kuwait show the least transmission of error variance from TPU during higher-volatility conditions (τ = 0.95). Moreover, the application of the Frequency-domain QVAR technique underscores the need for short-term speculators to exercise increased vigilance during bearish and bullish volatile periods, as TPU shocks can exert a more substantial influence on the Islamic equity market volatility of Bahrain, Oman, Kuwait, and Saudi Arabia. Long-term investors may need to tailor their asset-allocation strategies by increasing allocations to more stable assets that are less susceptible to TPU shocks, such as Qatar, during bearish (τ = 0.05), moderate (τ = 0.50), and bullish (τ = 0.95) volatility. Full article

In this study, we examine the herding behavior in MENA stock markets in response to global geopolitical risk by using daily data, ranging from 4 January 2011 to 31 December 2023, on stock-listed companies in some MENA countries (Egypt, Jordan, Lebanon, Morocco, Saudi Arabia, and Tunisia) and the daily geopolitical risk index. In our analysis, we consider that investors’ behavior varies depending on the global economic and political period conditions. We use quantile regression analysis to investigate the effect of asymmetry on herding behavior among investors during bearish and bullish market conditions. The results show that herding behavior is evident in all stock markets, except for the Lebanon market, at a lower 5% quantile during down-market periods. A significant estimated coefficient of geopolitical risk was detected on the dispersion of stock returns, except for the stock markets of Morocco and Saudi Arabia. We found that a high level of geopolitical risk contributes to an increase in dispersion in the Lebanese stock market whereas it is associated with a high probability of increasing herding in the Jordanian and Tunisian stock markets. This paper contributes to the existing literature by explaining the impact of geopolitical risks on herding behavior in six MENA countries. This can be considered to be an empirical contribution as we propose to introduce the effect of geopolitical risks on the basis model of herding. Our findings can have significant implications for investors and policymakers in financial markets. Full article

This study examines the influence of audit committee chair (ACC) characteristics on environmental, social, and governance (ESG) disclosure within the Saudi stock market. Analyzing data from 40 non-financial firms from 2017 to 2022, our analysis yields three key findings. First, ACC accounting expertise positively correlates with enhanced ESG disclosure, indicating that financially proficient chairs improve sustainable governance practices. Second, while ACCs with multiple directorships negatively impact ESG scores, this relationship is not statistically significant, suggesting that other factors may mitigate the drawbacks of multiple directorships. Third, the independence of ACCs has a substantial positive impact on ESG disclosure, emphasizing the importance of autonomous chairs in enhancing ESG integrity and transparency. These findings align with Saudi Vision 2030, promoting sustainable and ethical business practices. Future research should explore the impact of ACC characteristics on ESG performance across different contexts and industries. Full article

The increasing complexity of sustainable development amid financial market regulations has increased the importance of high-quality datasets. However, there is a lack of an integrated approach combining green-finance metrics with the requisite data optimization. This study presents an integrated approach combining green-finance metrics with data optimization. The study uses factorial design methodologies on a sample of 30 firms listed on the Saudi Stock Exchange. Data over five years (2018–2022) were analyzed, focusing on key financial metrics, ESG (environmental, social, and governmental) scores, and sustainability factors. Data analysis used machine-learning models including random forest and XGBoost, Principal Component Analysis (PCA), and regression techniques to evaluate prediction accuracy. The findings revealed that extending the data history from 1–2 to 3–5 years reduced the mean squared error (MSE) by up to 40%, with the XGBoost model achieving an MSE of 0.03 and demonstrating better generalization. In contrast, random forest showed a near-perfect fit with an MSE of 0.00 but risked overfitting. The sampling frequency also affected the accuracy, with weekly and monthly sampling outperforming daily intervals, resulting in an MSE improvement of 15–20%. This study provides a framework for integrating ESG metrics into economic models, aiding policymakers and industry leaders in making informed decisions. The promising results of this study also open avenues for future research and development in sustainable finance and data analysis, offering hope for further progress and innovation. Full article

After the onset of the armed conflict between Russia and Ukraine, Poland was forced to change its markets for sourcing raw materials, specifically oil and gas. Simultaneously, as a member of the EU and due to its geographical location in Europe, Poland must meet emission standards and ensure energy security. The aim of this publication is to analyze and evaluate the management of the fuel supply chain (FSC) in Poland in the context of energy security. The main research question formulated is to what extent the management of the FSC can ensure Poland’s energy security. The publication employs two models: MAED (Model for Analysis of Energy Demand) and CDM (canonical distribution model). The research is based on data from the Statistical Office and data provided by the fuel industry. Between 2021 and 2023, Poland diversified its supply sources, mainly from Saudi Arabia (45.2%) and Norway (35.2%), which together account for 80.4% of imports. The current fuel storage capacity (15.05 million m³) is capable of securing production logistics in the event of SC disruptions and market uncertainties. The shift in fuel supply logistics during the discussed period, along with the increase in the fuel safety stock coefficient to quantities exceeding current demand in case of further disruptions caused by external factors, affects the security of the Polish state as well as neighboring countries in Central Europe. Distribution logistics are managed domestically through networks of fuel stations operated by Polish and foreign corporations, including a group of independently owned private fuel stations (47.5%). The fuel industry in Poland has risen to the challenge, maintaining the stability of fuel supplies and their prices. Full article

Some US-listed country exchange-traded funds (ETFs) suffer from chronic and meaningful mispricing in the form of premiums or discounts relative to their fundamental value despite the presence of the creation/redemption mechanism. This mispricing is mainly attributed to the staggered information flow due to nonoverlapping time zones between the market where the ETF is listed and its underlying home market. This study provides out-of-sample evidence on the price formation of Gulf Cooperation Council (GCC) country ETFs and gauges the impact of mispricing on their underlying home markets. The GCC context is particularly insightful because these markets have nonoverlapping time zones with the US and follow distinct trading schedules. Our sample comprises daily data from three countries’ iShares that exclusively track the Qatari, Saudi, and Emirati stock markets from 17 September 2015 to 14 March 2023. The results show that GCC ETFs are driven mainly by their net asset values (NAVs), albeit imperfectly, while the S&P500 exerts a relatively mild influence on these ETFs compared to other country ETFs, as reported by prior studies. Moreover, we find that crude oil prices positively and significantly impact GCC ETFs’ pricing. When we control for unsynchronized trading days between the US and the GCC home markets, we find a structural difference between overlapping and nonoverlapping trading days. This structural difference manifests in a sluggish adjustment to correct mispricing in the ETF market on the day the home market is closed; however, other variables, including the S&P500, show no discernible difference, which refutes the overreaction explanation. This recurrent pattern is reflected in a clear day-of-the-week pattern in the price discovery these ETFs offer to their underlying home markets. Full article

This research aims to examine whether corporate Twitter messages and tone have an effect on corporate stock return (RET) for the Saudi Stock Exchange “Tadawul”. The study also investigates whether the association differs across large- and small-sized firms. We used a sample of 11,099 firm-daily observations for non-financial firms that were traded on the Saudi Stock Exchange “Tadawul” across the period 1 April 2020 to 31 December 2020. Using panel ordinary least square (OLS) and two-stage least square (2SLS), we found that corporate Twitter (currently renamed ‘X’) messages is positively and significantly associated with stock return (RET). The findings also suggest that the message tone increases the stock returns. Furthermore, our results show different effects of Twitter messages and tone on stock return across small- and large-sized firms. In addition, our findings show that Twitter tone is positively associated with RET when the firm is large in size. However, when the firm is small, Twitter messages has a stronger effect on RET. Our findings provide policy implications for regulators and investors. Regulators might monitor the information in accurate ways. Also, investors might start to show interest in Twitter channels to follow the firm’s news. Full article

This study investigated the relationship between environmental, social, and governance (ESG) disclosure and the performance of Saudi Arabian companies. We analysed panel data from the 100 non-financial companies listed on the Saudi stock exchange (Tadawul) from 2017 to 2022. Using fixed effects, random effects, and generalised method of moments (GMM) models to account for endogeneity concerns, we examined the impact of ESG disclosure on the return on assets (ROA), return on equity (ROE), and Tobin’s Q. An ESG index was constructed through a principal component analysis of individual environmental, social, and governance scores. Our results indicate a significant positive relationship between ESG disclosure and companies’ key performance variables across all models. These findings are consistent with stakeholder theory and signalling theory, suggesting that comprehensive ESG practices can lead to better financial performance and serve as a positive signal to stakeholders. The study also reveals sector-specific differences, with non-manufacturing firms showing stronger positive relationships between ESG disclosure and performance measures compared to manufacturing firms. Additionally, we find that firm size, age, and liquidity are important factors influencing the ESG–performance relationship. This research contributes to the growing literature on ESG and corporate performance in emerging markets, offering valuable insights for policymakers, investors, and corporate practitioners in Saudi Arabia’s evolving sustainable business landscape. Our findings underscore the importance of ESG disclosure in driving sustainable and responsible business practices in the region. Full article

This paper examines the volatility risk in the KSA stock market (Tadawul), with a specific focus on predicting volatility using the logarithm of the standard deviation of stock market prices (LSCP) as the output variable. To enhance volatility prediction, it proposes the combined use of the dynamic evolving neural fuzzy inference system (DENFIS) and the nonlinear spectral model, maximum overlapping discrete wavelet transform (MODWT). This study utilizes a dataset comprising 4609 observations and investigates the inputs of lag 1 of the close stock price (LCP), the natural logarithm of oil price (Loil), the natural logarithm of cost of living (LCL), and the interbank rate (IB), determined through autocorrelation (AC), partial autocorrelation (PAC), correlation, and Granger causality tests. Regression analysis reveals significant effects of variables on LSCP: LCP has a negative effect, and Loil has a positive effect in the ordinary least square (OLS) model, while LCL and IB have positive effects in the fixed effect model and negative effects in the random effect model. The MODWT-Haar-DENFIS model was developed as we found that the model has the potential to be an effective model for stock market forecasting. The results provide valuable insights for investors and policymakers, aiding in risk management, investment decisions, and the development of measures to mitigate stock market volatility. Full article