THE EFFICIENCY OF THE STOCK MARKET

THE EFFICIENCY OF THE STOCK MARKET

Abstract

The purpose of this paper was to analyze the efficiency of the stock market (Qatar).In this study, an attempt is also made to test the validity of theories employed in the literature to explain variation in the extent of corporate voluntary disclosure within the corporate social disclosure context. The annual reports of 21 out of the 22 companies listed on the Doha Stock Exchange in Qatar were used as a basis for the study. Variations in corporate social disclosure by the sampled Qatari companies are found to be associated with firm size measured by the firm's market capitalisation, business risk measured by leverage and corporate growth. The outcome of the study lends partial support to agency theory, political economy theory, legitimacy theory, stakeholder theory as well as the accountability approach.

Table of Content

Table of Content3

Chapter I4

Introduction4

Background4

Purpose of Study6

Hypothesis6

Research Questions:6

Financial reporting and auditing systems in Qatar6

Previous Studies9

Chapter II13

Literature Rearview13

Theoretical Orientation15

The environment of corporate reporting in Qatar18

Model Development27

Chapter III32

Methodology32

Data collection36

Chapter IV39

Findings39

Descriptive Statistics39

Pearson Correlation44

Multiple Regressions46

Discussion54

Trading system design choices: efficiency versus transparency56

Electronic exchanges lower costs56

Dealer-centered systems expand liquidity and volume, but hinder transparency58

Chapter V63

Conclusion63

References66

Chapter I

Introduction

Background

Different factors have been used in the literature to explain variations in the extent of voluntary information disclosed by firms. Numerous articles have investigated factors that impact the extent of firms' voluntary disclosure in general. A limited number of studies, however, have examined the determinants of corporate social disclosure (CSD) in particular. In addition, most of the studies undertaken in the area of corporate social reporting focused on developed countries. In this study, an attempt is made to examine factors that influence the extent of CSD in Qatar. Qatar is the fastest growing country within the Gulf Co-operation Council (GCC) countries. It hosts the youngest stock exchange in the region. As an oil and gas exporting country, the country's fixed capital formation increased from US $1,332 million in 1997 to US $3,732 million in 1998. Between 1992 and 2002, the country's GDP increased from QR 24,289 to QR 63,578 million (1.618 times) and achieved an average growth of 8.5 percent. At the end of the first half of 2003, the Doha Securities Market Index increased by 865.67 points (32.09%) in comparison with that achieved at the end of 2002. The gross value of shares traded in the Doha Securities Market, in the first half of 2003, increased by 113.3% in comparison with the same value reported at the end of 2002. At the end of the first half of 2003, the number of trading shares and the executed contracts increased by 51.1 and 173.7% respectively. With a population around 600,000, Qatar is among the highest per capital nations in the world (International Financial Statistics, 2003).

The above statistics seem to convince policy makers in Qatar to move toward a diversified economy. Currently, Qatar economy is mainly dependent on oil exports. Fluctuations in oil prices make the country's economy subject to endless shocks. Hence, governments in the GCC countries realised that it ...