Dynamics Of The Relationship Between Bank Loans And Stock Prices In Saudi Arabia

Almutair, Saud

doi:10.19030/iber.v14i3.9209

Cited by 5 publications

(4 citation statements)

References 21 publications

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“…Gulf Cooperation Council (GCC) stock markets are not weak form efficient, as past price movements of one GCC market can be used to predict the current price movement of another GCC stock market (Jamaani and Roca, 2015). Saudi market is an efficient market by finding the dynamics of the relationship between bank loans and stock returns (Almutai, 2015), whereas there is no significant reaction of prices to the dividend announcements for Saudi market using signaling theory (Qudah and Badawi, 2014). Saudi Stock Market underreact to positive news and overreact to positive news (Alzahrani and Skerratt, 2010), and Saudi stock market is the weak form market efficient for all share prices and 11 individual sectors by using four different tests (Asiri and Alzeera, 2013).…”

Section: Literature Review and Theoretical Frameworkmentioning

confidence: 99%

Earnings announcements, stock price reaction and market efficiency – the case of Saudi Arabia

Syed

Bajwa

2018

IMEFM

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Purpose-This study aims to find the response by stock market against the announcements of quarterly earnings is empirically tested by exploiting event study methodology. Efficient market hypothesis (EMH) on Saudi stock exchange is also tried on. Design/methodology/approach-The market model is applied to help gauge the expected returns and to illustrate abnormal returns around the event date. Findings-The results established that Saudi Stock Market does not bear semi-strong form of EMH. How efficient is the Saudi market is also reflected through evidence of significant abnormal returns and postearnings announcement drift around earning announcements dates. Research limitations/implications-The authors have not used analysts' forecast as the expected earnings which are the limitation. As mentioned earlier, the authors used the quarterly earnings of the previous year as a proxy and that proxy could have been replaced by analysts' forecast. Another limitation is that the trading volume in the event window is not considered. Practical implications-The behavior of Saudi capital market is of much concern, and the study of this with a perspective of EMH is the significance of this paper. Social implications-All stakeholders closely watch earnings announcements and its share price movement around the announcement date. Recently, Saudi Arabia has opened its doors to foreign investors, and big foreign investors are going to enter into Saudi capital market, and after their entry, the behavior of market could be different. In the authors' opinion, this is the right time to study the efficiency of Saudi market before the entry of foreign investors. Originality/value-This study is based on the gap created by EMH of Saudi market using event methodology, observed in the existing literature, and it will be a contribution to literature.

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Section: Literature Review and Theoretical Frameworkmentioning

confidence: 99%

Earnings announcements, stock price reaction and market efficiency – the case of Saudi Arabia

Syed

Bajwa

2018

IMEFM

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“…They found a contra to the existing relationship between stock price and bank loans, which means that stock prices and bank loans are independent. Almutair (2015) investigated the dynamics of the relationship between bank loans and stock prices in Saudi Arabia applying quarterly data for 1998 to 2013. The study found a positive relationship between Saudi's stock market index (SSPI) and bank loans where the total bank loans (TOTALL) response positively to the increase in stock prices but not in other way arround.…”

Section: Literature Reviewmentioning

confidence: 99%

Responses of Stock Price to the Public Announcement of Forms of Borrowing

Sumon¹,

Miyan²

2021

IJEF

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This study investigates the question of whether an announcement of bank loan agreement increases the abnormal return. That is, the bank loan agreement conveys some positive information about the borrowing firm. The study used three different event windows (i.e.) two-day, three-day, and five-day windows to check the effect of the announcement for a period of 1995 to 2015. In order to measure the effect, the return has been calculated using the market model, then CARs have been calculated. The study found that CARs is statistically significant for all of the three-event windows. In the two-day window, it is found that abnormal return increases by 15 BPS within these two days, which is almost 19.315% on an annual basis. It is also evident in the study that the effect of the announcement is more on small size firms.

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“…In the context of Saudi Arabia, Abdul-Muhmin (2008) attributed the rise in household debt to the increasing banks' liquidity. Almutair (2015) argued that consumer lending is positively related to the stock market index. The recent study conducted by Miyajima (2017) examined macroeconomic variables influencing credit growth in Saudi Arabia.…”

Section: Literature Reviewmentioning

confidence: 99%

Macroeconomic Determinants of Consumer Lending in Saudi Arabia

Alnefaee

2019

Journal of Accounting, Business and Finance Research

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This paper empirically investigates the macroeconomic variables that influence consumer lending in Saudi Arabia using quarterly data for the period of 1996-2017. The Johansen and Juselius (1990) multivariate cointegration test were used to examine the impact of banks liquidity, interest rate, oil prices and GDP per capita on consumer lending. The test results indicate the existence of the long-term relationship and the empirical results show that consumer lending is positively influenced by a change in banks liquidity, growth in oil prices and GDP per capita. Contrary to expectation, the interest rate was positive and significant. The modified Granger causality test in Error Correction Model framework reports bidirectional causality from banks liquidity to consumer lending and vice versa, while unidirectional causality from GDP per capita and interest rate to consumer lending. The main finding of the paper is to encourage the monetary authority to allow for a gradual phase-out of restrictions on the number of personal loans as well as enhancing consumer protection mechanism to prohibit unfair contractual terms in the agreements.

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Dynamics Of The Relationship Between Bank Loans And Stock Prices In Saudi Arabia

Cited by 5 publications

References 21 publications

Earnings announcements, stock price reaction and market efficiency – the case of Saudi Arabia

Earnings announcements, stock price reaction and market efficiency – the case of Saudi Arabia

Responses of Stock Price to the Public Announcement of Forms of Borrowing

Macroeconomic Determinants of Consumer Lending in Saudi Arabia

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