Search results

1 – 10 of over 4000
Article
Publication date: 12 December 2016

Wael Mostafa

Motivated by the lack of research on the value relevance of accounting information in the emerging markets of Middle Eastern countries, and the unique institutional and accounting…

2096

Abstract

Purpose

Motivated by the lack of research on the value relevance of accounting information in the emerging markets of Middle Eastern countries, and the unique institutional and accounting setting in Egypt, this paper aims to investigate the relation between capital market and accounting information in the emerging market of Egypt. Specifically, based on Egyptian data, this study examines the value relevance of earnings, cash flows from operations and book values.

Design/methodology/approach

To examine the value relevance of the above accounting measures, this study uses statistical associations between accounting information and capital market values: the association between earnings and annual returns; the association between cash flows and accruals, and annual returns; and the association between earnings and book values of equity, and stock prices.

Findings

The results show that, first, earnings have value relevance. However, earnings changes are significantly more successful than earnings levels in explaining security returns. These results suggest that changes in earnings are largely permanent; hence, earnings follow (close to) a random walk model. Second, contrary to what is stated in the literature, cash flows from operations are not successful in explaining stock returns. This result suggests that cash flows are less important and not value relevant in Egypt compared to the USA or the UK. A possible explanation is that cash flows in Egypt are very volatile (high variance) and not persistent, so the market does not rely on them. Third, individually, both earnings and book values significantly explain stock prices; however, jointly, earnings have incremental explanatory power beyond book values for stock prices whereas book values do not. These results suggest that in Egypt the income statement is much more important than the balance sheet for valuation purposes. Overall, these results are interesting because they do not completely replicate the results from other countries.

Practical implications

The existence of value relevance for earnings despite the apparent lack of value relevance for cash flows can be interpreted as indicating that accruals are designed to offset and smooth cash flows’ volatility and low value relevance, so that earnings are relatively more persistent and relevant. These results show that earnings potentially are a much more important and informative measure of a firm’s value than cash flows from operations in Egypt. However, we certainly need the cash flows information as an ex-post validation of the prior earnings. Overall, it appears that the investors in Egypt are looking at the accounting data when evaluating the value of the firm, which is a good sign. However, the empirical findings of this paper are discussed.

Originality/value

This study contributes to the limited research on value relevance of accounting information in the emerging market of Egypt.

Details

Management Research Review, vol. 39 no. 12
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 1 July 2006

Aiman A. Ragab and Mohammad M. Omran

The purpose of this paper is to examines empirically whether national and international investors in the Egyptian stock market perceive accounting information based on the…

2533

Abstract

Purpose

The purpose of this paper is to examines empirically whether national and international investors in the Egyptian stock market perceive accounting information based on the Egyptian Accounting Standards to be useful in stock valuation.

Design/methodology/approach

Using a sample of all available listed firms in the emerging market data base from 1998 to 2002, evidence of the value relevance of accounting information in Egypt was obtained, based on both return and price models.

Findings

The results suggest that stock prices in Egypt are less information about the future value of the firm than is accounting information. It is perhaps unreasonable to conclude that accounting information has higher value relevance in Egypt because financial reporting is of higher quality. It might, however, imply that competing information sources such as earnings forecasts, firm research by financial analysts, management conference calls, etc. are far less relevant in Egypt.

Originality/value

This study is of value in that it highlights how the Egyptian stock market needs complementary information sources other than published accounting reports, to become more informationally efficient.

Details

Review of Accounting and Finance, vol. 5 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 1 January 2012

Ibrahim El‐Sayed Ebaid

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the…

2017

Abstract

Purpose

The purpose of this paper is to examine and compare the relative and incremental value‐relevance of a comprehensive set of accounting‐based measures of firm's performance in the emerging capital market of Egypt.

Design/methodology/approach

The regression models are estimated using OLS to investigate the relative and incremental value relevance of accounting‐based performance measures. The relative value relevance tests are used to examine which performance measures better explain stock returns. The study also uses the incremental value relevance tests to examine whether one of these measures provides value‐relevance data beyond that provided by another.

Findings

The results of the empirical tests indicate that relative and incremental value relevance tend to increase when moving down in the income statement, with net income having the largest relative and incremental value relevance while total sales have the lowest relative and incremental value relevance. Also, all of the accrual‐based performance measures have relative and incremental value relevance statistically higher than that of operating cash flows.

Research limitations/implications

The results highlight the importance of accounting‐based performance measures in Egypt. The results shed light on the fixation on net income that is bottom line performance measure in the income statement where net income has the highest value relevance to Egyptian capital market. However, owing to relatively small sample size, given the thinness of the Egyptian capital market, these findings should be interpreted with caution.

Originality/value

This study presents extended research on the usefulness of accounting‐based metrics as proxies for firms' performance in Egypt as one of emerging markets.

Details

Management Research Review, vol. 35 no. 1
Type: Research Article
ISSN: 2040-8269

Keywords

Article
Publication date: 21 May 2021

Laila Mohamed Alshawadfy Aladwey

This paper aims to examine the effect of different modes of equity ownership structure in unconditional conservatism of financial reporting for non-financial listed companies in

Abstract

Purpose

This paper aims to examine the effect of different modes of equity ownership structure in unconditional conservatism of financial reporting for non-financial listed companies in Egypt.

Design/methodology/approach

Using a large sample of Egyptian non-financial listed companies for the period from 2011–2018, this paper used the ordinary least square regression model to test the impact of equity ownership equity on accounting conservatism based on an accrual-based measure developed by Givoly and Hayn (2000) and Ahmed and Duellman (2007).

Findings

The paper finds that, on average, Egyptian listed companies tend to demonstrate lower levels of unconditional conservatism during the period from 2011–2018. Regarding the different patterns of equity shareholding, a negative association between unconditional conservatism and managerial ownership is found. Briefly, the mild equity shareholding of managers in Egyptian listed companies is accompanied by higher demand for conservative reporting. Besides, a negative association is also reported for the relationship between concentrated ownership and unconditional conservatism in which the concentration of shareholding by a few numbers of individual investors lessen the demand for conservatism. By contrast, a non-significance relationship is reported neither for institutional shareholders nor for governmental ownership in their relationship with unconditional conservatism.

Research limitations/implications

The paper does not take into account the modifications conducted on the Egyptian accounting standards according to decree number 69 for the year of 2019 because they were not valid until the publishing of this paper. It considers only non-conditional conservatism.

Practical implications

First, the paper provides clear empirical evidence that Egyptian listed companies are adopting less-conservative accounting policies in their financial reporting during a high-tension period that witnessed several radical political and economic events. This evidence should stimulate regulators and policymakers to revisit the reporting standards to improve the quality of financial information and should also guide investors’ decisions because it helps in clarifying their interpretation of figures and trends reported in financial statements. Second, the paper would direct the attention of the Egyptian government to the importance of increasing their investment in the stock market to enhance its regulatory role. Third, it gives some implications to investors and policymakers toward the shape of the relationship between accounting conservatism and each pattern of equity shareholding in Egypt.

Originality/value

This paper visualizes an image toward the current state of equity ownership structure for listed companies in Egypt within a period that witnessed critical vulnerabilities and irregularities. In addition, it addresses how the accounting conservatism would be shaped according to the different types of equity shareholdings in Egypt.

Details

Journal of Financial Reporting and Accounting, vol. 19 no. 5
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 1 June 2009

M.F. CFA Omran

The study examines determinants of price earnings (PE) multiples and their ability to forecast short term returns in the Egyptian stock market during the period from 2002 to 2007…

Abstract

The study examines determinants of price earnings (PE) multiples and their ability to forecast short term returns in the Egyptian stock market during the period from 2002 to 2007. Three factors were tested for their ability to determine the PE multiples. The three variables are growth, payout and return on equity (ROE) in the period from 2002 to 2005. Only Payout and ROE were found to be significant. The ability of past average PE multiples to explain and therefore forecast future short term returns were tested. Short term returns as measured by changes in stock prices from 2006 to 2007 were regressed against the past average PE multiples in the period from 2002 to 2005. The results indicate that the past high or low PE multiples give no insight on the direction and magnitude of future short returns. An important finding of the paper is that expectations about above average future growth can influence PE multiples more than the average past growth. This happens when the economy or some sectors of it are expected to witness far more growth than its past. It is therefore recommended for future studies that a quantitative or qualitative measure of future expectations should be included in the PE determinants formula in Egypt or countries expected to have very high or above average future growth in some of its sectors.

Details

Journal of Economic and Administrative Sciences, vol. 25 no. 1
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 29 April 2022

Hanan AbdelKhalik Abouelfarag and Rasha Qutb

The purpose of this study is to empirically examine the impact of the novel coronavirus (COVID-19) on Egyptian stock market returns and volatility between July 2018 and June 2021.

Abstract

Purpose

The purpose of this study is to empirically examine the impact of the novel coronavirus (COVID-19) on Egyptian stock market returns and volatility between July 2018 and June 2021.

Design/methodology/approach

This study utilizes a generalized autoregressive conditional heteroskedasticity (GARCH) model to examine the impact of COVID-19 on two basic stock market indices (EGX30 and EGX100). In addition, the heteroskedasticity corrected model (HCM) was employed to differentiate between the effects of each subsequent wave of the pandemic.

Findings

The results of the GARCH model revealed that all COVID-19 variables have a significant impact on the daily returns of EGX100, but an insignificant impact on that of EGX30. The mortality rate and transmission speed increased the market volatility of EGX30 daily returns. The results of the HCM confirmed that the Egyptian stock market reacted more nervously to the first wave than to the second, while the impact was not detected in the third wave.

Practical implications

This study provides useful insights to investors and policymakers in handling the negative influence of unanticipated events. To retain economic stability, the Egyptian government can impose fiscal stimuli and consider policies to combat the impact of the pandemic.

Originality/value

This study is one of the first attempts to differentiate between the effects of subsequent waves of the pandemic on the stock market in Egypt, one of the largest economies in Africa.

Details

African Journal of Economic and Management Studies, vol. 13 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 1 August 2023

Eman Ismail, Mohamed H. Elsharnouby and Mahmoud H. Abd Elaal

This study seeks to investigate the interrelationships among sector reputation, purchasing stock intention, sector engagement and attitude toward the sector. Moreover, it aims to…

Abstract

Purpose

This study seeks to investigate the interrelationships among sector reputation, purchasing stock intention, sector engagement and attitude toward the sector. Moreover, it aims to explore the moderating role of sector knowledge in the indirect relationship between sector reputation and purchasing stock intention, mediated by sector engagement and/or attitude toward the sector.

Design/methodology/approach

Drawing upon the theory of planned behavior, the research framework is empirically tested. A survey involving 300 potential and actual investors was conducted, representing individuals investing in tourism brands within the Egyptian stock market. The validity and reliability of the constructs were assessed using AMOS, while Hayes’s PROCESS macro was employed to examine the mediation and moderated mediation effects.

Findings

The findings reveal that sector reputation significantly influences sector engagement, attitude toward the sector and purchasing stock intention. Furthermore, the attitude toward the sector serves as an explanatory factor for investors’ propensity to purchase stocks of tourism brands. The study confirms the serial mediation effect of sector engagement and attitude toward the sector, respectively, in the relationship between sector reputation and purchasing stock intention. Additionally, it confirms the moderated mediation role of sector knowledge in the relationship between sector reputation and purchasing stock intention, mediated by attitude toward the sector.

Practical implications

The research outcomes suggest that executives in the tourism industry should identify key determinants to enhance purchasing stock intention by fostering greater sector engagement and fostering positive attitudes toward the tourism sector.

Originality/value

This study contributes to the existing literature by shedding light on the importance of maintaining a positive brand reputation and emphasizing the influential role of investors’ knowledge, engagement and attitude in shaping investment decisions in the stock market. These insights contribute to the understanding of investor behavior and have practical implications for organizations in managing their brand reputation and fostering positive customer–brand interactions in the stock market context, thus the current study was conducted.

Details

Management & Sustainability: An Arab Review, vol. 3 no. 1
Type: Research Article
ISSN: 2752-9819

Keywords

Article
Publication date: 30 August 2011

Christos Floros

The aim of this paper is to examine the dynamic relationships between Middle East stock markets.

1032

Abstract

Purpose

The aim of this paper is to examine the dynamic relationships between Middle East stock markets.

Design/methodology/approach

Daily data from the Egyptian (CMA) and Israeli Tel Aviv Stock Exchange (TASE‐100) stock indices are considered. The paper employs a Bivariate cointegration GARCH(1,1) model to explain price discovery and lead‐lag relationships for the period July 1997 – August 2007.

Findings

Empirical results confirm that the Egyptian market plays a price discovery role, implying that CMA prices contain useful information about TASE‐100 prices. CMA market is more informationally efficient than TASE‐100 market. Further, CMA index reflects new information faster than TASE‐100 index.

Research limitations/implications

Future research should examine the dynamic relationships between Middle East stock markets using intraday (high frequency) data and recent dynamic (long memory) methods.

Practical implications

The findings are helpful to financial managers and traders dealing with Middle East stock markets.

Originality/value

The contribution of this paper is to provide evidence on the stock market dynamics and financial linkages between two Middle East emerging markets using recent daily data and a modern econometric model. To the best of the author's knowledge, no previous study has tested the dynamic relationships between daily prices of CMA and TASE‐100.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 4 no. 3
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 22 February 2011

Konstantinos Tolikas

The purpose of this paper is to investigate the asymptotic distribution of the extreme daily stock returns in African stock markets over the period 1996‐2007 and examine the…

1250

Abstract

Purpose

The purpose of this paper is to investigate the asymptotic distribution of the extreme daily stock returns in African stock markets over the period 1996‐2007 and examine the implications for downside risk measurement.

Design/methodology/approach

Extreme value theory methods are used to model adequately the extreme minimum daily returns in a number of African emerging stock markets.

Findings

The empirical results indicate that the generalised logistic distribution best fitted the empirical data over the period of study.

Practical implications

Using the generalised extreme value and normal distributions for risk assessment could lead to an underestimation of the likelihood of extreme share price declines which could potentially lead to inadequate protection against catastrophic losses.

Originality/value

To the best of the author's knowledge, this is the first study to examine the lower tail distribution of daily returns for African emerging stock markets.

Details

Managerial Finance, vol. 37 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 25 January 2008

Tarek I. Eldomiaty and Mohamed H. Azim

The purpose of this paper is to examine firms' strategies to change long‐ and short‐term debt financing in Egypt. It aims to examine a list of capital structure determinants that…

2260

Abstract

Purpose

The purpose of this paper is to examine firms' strategies to change long‐ and short‐term debt financing in Egypt. It aims to examine a list of capital structure determinants that include the basic assumptions of the three well‐known theories of capital structure: tradeoff, pecking order, and free cash.

Design/methodology/approach

The paper utilizes the properties of partial adjustment model for three heterogeneous systematic risk classes: high, medium and low. The sensitivity analysis is carried out using the “extreme bound analysis”.

Findings

The results indicate that Egyptian firms adjust short‐ and long‐term debt according to the class of systematic risk; long‐term debt is a source of financing at all classes of systematic risk; firms have obvious tendency to extent short‐ to long‐term one; medium risk firms adjust long‐term debt according to the industry average debt, and depend heavily on long‐term debt financing; firms depend significantly and constantly on the liquidity position to adjust short‐term debt levels; and medium risk firms are relatively affected by the basic assumptions of free cash flow and low‐risk firms are relatively affected by the assumptions of the pecking order theory.

Research limitations/implications

In general, the results provide evidence that the three theories have transitory effect from developed markets to transitional markets. In addition, the firm‐specific variables (industry characteristic, size and time) provide an additional support to the robustness of the results.

Originality/value

Few, if any studies, have been carried out in Egyptian data.

Details

International Journal of Emerging Markets, vol. 3 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

1 – 10 of over 4000