The evolution of financial reporting quality for companies listed on the Tadawul Stock Exchange in Saudi Arabia: New emerging markets' evidence |
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| Affiliation: | 1. Prince Sultan University, Riyadh, Saudi Arabia;2. Jacksonville University, 2800 University Blvd N, Jacksonville, FL 32211, USA;1. Latin American Reserve Fund, Bogotá, Colombia;2. Department of Finance, Information Systems, and Economics, City University of New York – Lehman College, Bronx, NY, USA;3. (Summer School), Escuela Internacional de Ciencias Económicas y Administrativas, Universidad de La Sabana, Chía, Colombia;4. Faculty of Economics and Business, Universitat Oberta de Catalunya, Barcelona, Spain;5. Faculty of Economics and Business, Universitat de Barcelona, Barcelona, Spain;1. Universidade Jean Piaget de Guinea-Bissau, Guinea-Bissau;2. Laval University, 1245 Rue de la Colline, L''Ancienne-Lorette, QC G2E 3S1, Canada;1. FERDI (Foundation for the Studies and Research on International Development), 63, Bd François Mitterrand, 63000 Clermont-Ferrand, France;2. CERDI - Université Clermont Auvergne - CNRS - IRD, F-63000 Clermont Ferrand, France;1. Economist at the International Monetary Fund, Washington, D.C., USA;2. Department of Finance, Insurance and Real Estate, Laboratory for Financial Engineering of Laval University, Faculty of Business Administration, Laval University, Quebec, Canada;3. CEO of the Bourse Régionale des Valeurs Mobilières (BRVM), Abidjan, Côte d''Ivoire |
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| Abstract: | Motivated by the Saudi Arabian government's objective to diversify its economy away from oil and correct deficiencies associated with the Saudi stock market crash of 2006, a series of significant capital market infrastructure reforms were initiated that began with the 2007 reorganization of the Tadawul Stock Exchange (TSE) and the Capital Market Authority (CMA) as its sole regulator. This paper adds to the growing body of emerging market literature by providing new evidence of the effects of these initiatives on earnings quality for firms listed on the TSE. The results of tests of this study provide robust evidence that earnings quality increased during the 2007 to 2018 reform period. In particular, we document that relative to pre – reform years, reform period R squares, earnings response coefficients (ERCs) increased and discretionary accruals decreased. We rationalize these findings by asserting that improved regulatory oversight in juxtaposition with significant reform period investments into Saudi Arabia's capital markets infrastructure enhanced earnings quality (Jiambalvo et al., 2002; Latif et al., 2017; Zhong et al., 2017). |
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| Keywords: | ERC" },{" #name" :" keyword" ," $" :{" id" :" pc_tHKuiN3FIZ" }," $$" :[{" #name" :" text" ," _" :" earnings response coefficents TSE" },{" #name" :" keyword" ," $" :{" id" :" pc_9PXZ8IpJci" }," $$" :[{" #name" :" text" ," _" :" Tadawul Stock Exchange |
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