Casablanca Stock Exchange Research Articles

The impact of IFRS introduction by listed Moroccan companies on financial performance: The mediating role of the cost of capital

This study aims to examine the direct and indirect impact of IFRS adoption on the financial performance of Moroccan companies listed on the Moroccan financial market. The analyses are based on data drawn from the financial statements of 21 Moroccan companies listed on the Casablanca Stock Exchange. By measuring financial performance using three stock market measures, namely the Mariss ratio, the Price Earnings Ratio, and the Tobin Q ratio, and using the structural equation method with SPSS AMOS software, the results indicate that before the introduction of the cost of capital variable, IFRS significantly affect financial performance, with an estimated coefficient of 0.395 significant at the 5% threshold. By introducing the cost of capital variable, the results show that the direct and significant relationship between IFRS and performance disappears, recording an estimated coefficient of 0.241 with a non-significant probability level of 0.243. On the other hand, the results show that the estimated coefficients for the indirect effect of IFRS on financial performance are negative, i.e., a coefficient of –0.099 estimating the direct effect of IFRS on the cost of capital and a coefficient of –2.621 estimating the direct effect of the cost of capital on financial performance, significant at the 1% and 5% thresholds, respectively. This confirms the hypothesis that the transition to IFRS indirectly and totally influences financial performance via the cost of capital variable.

Moroccan SMEs and the Casablanca Stock Exchange: Governance Issues and Prospects for Introduction

This research paper examines the relationship between corporate governance mechanisms and Moroccan SMEs' access to the Casablanca Stock Exchange. It highlights the importance of SMEs in the Moroccan economy, their key role in value creation and economic growth, and the challenges they face in accessing finance, particularly through the capital markets. The text also explores corporate governance systems, comparing open (Anglo-Saxon) and closed (continental European) models, and situates Morocco in a closed system with a high concentration of capital in large companies. Cross-tabulation and multiple correspondence analysis reveal significant correlations between IPO and various variables, such as the presence of an audit committee, a corporate governance body and knowledge of good governance codes. The econometric model, based on binary logistic regression, confirms that the presence of an audit committee is the main determinant of IPO, significantly increasing the probability of listing. On the other hand, other variables such as beliefs and values, the management system, capital concentration or the management market did not show any significant correlation, highlighting that the quality of internal governance plays an essential role in access to the financial market in Morocco.

The Impact of Stock Introduction on Companies’ Performance: Case of Casablanca Stock Exchange

This study examines the impact of the introduction to stock market on the companies’ performance in order to investigate the post-Initial Public Offering (IPOs) effects for 30 Moroccan companies listed on the Casablanca Stock Exchange (CSE). The research employs a set of 20 indicators, divided into economic, commercial, and financial indicators, to represent different aspects of companies’ performance. Based on the panel of these companies and indicators ranging on 7 years horizon, including a year before stock market introduction, we conduct the Ordinary Least Square (OLS) to examine the effect of IPO on each indicator separately. The results show that companies benefit from revenue growth and a solid asset base, which is crucial for stability. However, the efficiency in using assets to generate income and the profitability of equity are still limited and raise concerns. Moreover, and despite the level of debt being monitored, companies still seem relatively healthy from a financial structure perspective.

Earnings Quality in the IFRS Era: Evidence from Morocco

Purpose: the aim of this study is to determine whether the introduction of International Financial Reporting Standards (IFRS) by Moroccan companies listed on the Casablanca Stock Exchange will contribute to improving the quality of earnings. Methodology: This study spans six years (2015-2020) and a sample of 27 listed Moroccan groups. Furthermore, we divided earnings quality into two main dimensions: on the one hand, earnings management, measured by earnings smoothing and earnings management towards small positive amounts; on the other hand, earnings attribute quality, assessed by accruals quality, persistence and predictability of net income and operating cash flows. Findings: The results of the empirical tests can be divided into two categories: On the one hand, the results of tests of the effect of IFRS on earnings management practices as the first measure of earnings quality show that companies use earnings management in the post-IFRS period compared with the pre-IFRS period. Furthermore, the results of tests of the effect of IFRS on the quality of earnings attributes as a second measure of earnings quality show that the various measures used appear to be of better quality in the pre-IFRS period than in the post-IFRS period. This indicates that the adoption of IFRS in the Moroccan context is contributing to deterioration in the quality of information. Practical implications: The authors demonstrate that the serious and rigorous adoption of IFRS by preparers, as well as training and seminars on the interpretation and application of each standard, are important to accentuate the positive effect of IFRS on the reliability of results. In addition, the findings provide policy-makers and stakeholders in the Moroccan financial market with an insight into the quality of Moroccan standards compared with IFRS in terms of earnings quality. Originality/value: to the best of the authors' knowledge, studies on the effect of IFRS on earnings quality in the Moroccan context are rare, if not non-existent. We therefore focus on this financial center, which mirrors developing countries, in order to highlight the effects of the introduction of IFRS on this type of market.

Asymmetric impact of the COVID-19 on the Moroccan stock exchange

PurposeThis study aims to investigate the asymmetric impact of the COVID-19 pandemic on the stock market returns of companies listed on the Casablanca Stock Exchange.Design/methodology/approachTo achieve this objective, we utilized the SymCovid series, which comprises two sub-series: one representing the deterioration of the pandemic situation (NEG) and the other representing the improvement of the pandemic situation (POS). We employed the Nonlinear Autoregressive Distributed Lag model, incorporating Bounds Testing as proposed by Pesaran and Shin (1999) and Pesaran et al. (2001), to explore the asymmetry of the pandemic’s impact on stock prices listed on the Casablanca stock exchange.FindingsOur analysis using the NARDL econometric model reveals an asymmetric effect of COVID-19 on stock prices. Notably, we observe that stock prices react more strongly to a worsening pandemic situation than to an improvement, on average. Furthermore, our main findings indicate that while the improvement in the pandemic situation has no significant long-term impact on stock prices, it does exhibit a significant positive effect in the short term. Conversely, the deterioration in the pandemic situation has a more pronounced negative effect on stock prices in the long term than the short term.Originality/valueOur study fills a gap in the existing literature by focusing on the impact of the COVID-19 pandemic on stock returns in the context of the Casablanca Stock Exchange, which has been relatively understudied compared to other regions such as Asia, Europe and the Americas. We go beyond previous research by examining whether stock returns exhibit asymmetric responses to changes in the pandemic situation, highlighting potentially unique dynamics in emerging market economies during crises and providing valuable information for investors, policymakers and researchers.

Assessing the Predictive Power of Transformers, ARIMA, and LSTM in Forecasting Stock Prices of Moroccan Credit Companies

In this paper, we present a data-driven approach to forecasting stock prices in the Moroccan Stock Exchange. Our study tests three predictive models: ARIMA, LSTM, and transformers, applied to the historical stock price data of three prominent credit companies (EQD, LES, and SLF) listed on the Casablanca Stock Exchange. We carefully selected and optimized hyperparameters for each model to achieve optimal performance. Our results showed that the LSTM model achieved high accuracy, with R-squared values exceeding 0.99 for EQD and LES and surpassing 0.95 for SLF. These findings highlighted the effectiveness of LSTM in stock price forecasting. Our study offers practical insights for traders and investors in the Moroccan Stock Exchange, demonstrating how predictive modeling can aid in making informed decisions. This research contributes to advancing stock market forecasting in Morocco, providing valuable tools for navigating the Casablanca Stock Exchange.

The effect of adopting IFRS on the relevance of information: The case of Moroccan companies listed on the Casablanca Stock Exchange

Since the introduction of IFRS in the European context and various countries worldwide, several studies have examined the impact of this new approach to asset and liability valuation on financial ratios and company values. The present study attempts to determine whether accounting figures prepared in accordance with this new international accounting regime better reflect the market value of companies listed on the Moroccan market compared to those prepared under Moroccan accounting standards. Empirically, the study is based on association studies using the returns model and covers a sample of 27 companies listed on the Casablanca Stock Exchange for the period 2015–2020, i.e., 162 observations. The regression results show that accounting figures prepared according to IFRS standards better reflect stock market profitability than those prepared according to local standards, with the explanatory power increasing from 16.76% to 23.64% for the pre-IFRS period compared to the post-IFRS period. This means that by adopting IFRS standards, accounting values tend to be closer to stock market values, thus confirming the hypothesis that IFRS standards deliver a better information content of accounting figures.

Legal obligation of ESG reporting and the quality of environmental disclosure practices: the case of Moroccan listed industrial companies

Purpose This paper aims to examine the impact of the legal obligation for environmental, social, and governance (ESG) reporting, introduced in 2019 by the Moroccan Capital Market Authority (AMMC), on the environmental disclosure practices of industrial companies listed on the Casablanca Stock Exchange (CSE). Design/methodology/approach An analysis of the content of the ESG reports of the industrial listed companies on the CSE is carried out over the two years that frame the year of implementation of the AMMC circular, i.e. 2018 and 2020, to analyze the difference in the quality of their environmental disclosures using a conformity criterion based on the Environmental section (N°300) of the “Global Reporting Initiative (GRI)” standards. Findings The results confirm the presence of a positive effect of the legal obligation for ESG reporting on the quality of environmental reporting of Moroccan industrial listed companies. However, the degree of compliance with the GRI framework remains incomplete. Originality/value This study helps to highlight the effectiveness of regulatory measures in improving the disclosure of relevant corporate environmental reporting of listed companies. The study also provides an overview of the progress made in implementing quality environmental reporting standards, specifically the GRI framework, in a developing country, namely, Morocco.

A comparative study of ensemble learning algorithms for high-frequency trading

High-Frequency Trading utilizes powerful mathematical algorithms to execute transactions at an extremely rapid pace, which makes the use of machine learning techniques for prediction necessary. This paper evaluates the effectiveness of various ensemble learning algorithms, including Boosting (Adaboost and XGBoost), Bagging (Random Forest and Bagging-LSVM), and Stacking, in predicting stock prices using High-Frequency Trading (HFT) data from the Casablanca Stock Exchange. The data contains 311.812 transactions at the millisecond precision level and was obtained under a non-disclosure agreement. Three performance metrics are used: Root Mean Squared Error (RMSE), Mean Absolute Error (MAE) and Mean of the Squared Errors (MSE) and accuracy of predictions is assessed daily, monthly and annually. The study shows that the Stacking Model outperforms other algorithms in forecasting prices across different periods due to its ability to generate profit from multiple learners and construct a robust model. These results provide valuable insights for improving High-Frequency Trading (HFT) strategies, including the accuracy and robustness of the algorithms in predicting stock prices, which are crucial for effective HFT strategies. The findings highlight how each algorithm characteristics and performance metrics can enhance decision-making in HFT. The novelty of this study lies in its unique combination of a focus on an emerging market, the application of advanced ensemble learning algorithms to high-frequency data, and its comprehensive approach to evaluating algorithm performance. Also, this paper is the first study that focuses on applying ensemble learning algorithms to high-frequency data in Casablanca Stock Exchange and one of the rare that focuses on African stock markets. Thus, this study is pioneering in its comparative analysis of machine learning techniques for HFT in Morocco, introducing sophisticated and more accurate tools for analyzing and predicting Casablanca Stock Exchange trends.

Decoding tax management: The role of corporate governance mechanisms

While tax pressure remains a major concern in corporate management, it is legitimate to ask whether tax has always been among the core factors of corporate governance (Chytis et al., 2020). This study aims to examine the influence of corporate governance on tax management practices within Moroccan firms listed on the Casablanca Stock Exchange (CSE). Focusing on three dimensions of corporate governance — board composition, audit committee structure, and external audit quality — we employed multiple regression analysis on data spanning 2014–2019 from a sample of 48 listed firms, totaling 288 firm observations. Significantly, board size, chief executive officer (CEO) duality, and external audit quality are found to be pivotal factors shaping tax management practices. Other corporate governance variables, notably the independence of the board of directors and the structure of the audit committee, do not appear to exert a significant influence on the tax management of listed Moroccan companies. Our study is one of the few to have addressed the issue of tax management in the Moroccan context. Moreover, it may also serve as a fundamental resource for researchers exploring the complex dynamics of tax practices in the organizational context.

Gender diversity on the board and investment effectiveness in the emerging market

The implementation of new gender diversity requirements has sparked significant research interest in assessing how such a commitment influences value-creation indicators (Chebri & Bahoussa, 2020). This study aims to examine the impact of gender diversity in the board of directors on the investment efficiency of listed firms in Morocco, using panel data from a sample of 36 non-financial firms listed on the Casablanca Stock Exchange for the period 2014 to 2019. To accurately identify the board dimensions that determine firms’ investment efficiency, we conduct a fixed-effects regression analysis, in which a firm’s investment efficiency variables are regressed, directly and indirectly (i.e., the moderating effect of board diversity), on board attributes. This study draws on the complementary propositions of agency theory and social feminist theory. The empirical results of this study indicate that diversity not only has a positive and significant direct impact on the level of investment effectiveness but also moderates the relationship between board characteristics and investment effectiveness. This study provides empirical evidence of the moderating role of gender diversity on the effect of board structure and investment effectiveness.

EMPLOYER BRANDING AS A TOOL FOR EMPLOYEE LOYALTY: THE CASE OF MOROCCAN COMPANIES LISTED ON CASABLANCA STOCK EXCHANGE

To attract qualified profiles, known as talents, and to retain them, many enterprises are actively leveraging on employer branding. The objective of this research is to shed light on the role played by the concept of employer branding, defined as the set of brand image assets with respect to employees and their impact on human resources loyalty. Our hypothetico-deductive research method will be completed by conducting an empirical study based on a series of semi-structured interviews with 10 large companies listed on Casablanca stock exchange market. We suggest a model to articulate the employer brand around three key dimensions: low propensity to seek a new job, affective engagement and task performance. The collected and analyzed feedback led us to a clear and obvious conclusion. The intention to leave the company, the affective commitment as well as the performance in the task are directly impacted by the attributes of the employer brand. Therefore, organizational loyalty is influenced by the employer brand. The latter is a powerful loyalty tool that allows the company to retain talent. Further research should be conducted to explore the potential of employer branding as a powerful tool for talent retention.

The Effect of the COVID-19 Pandemic on Corporate Dividend Policy of Moroccan Listed Firms

The recent literature provides conflicting findings and remains inconclusive regarding the impact of the COVID-19 crisis on firms’ dividend policies. In this paper, we examine the dividend policy of Moroccan firms listed in the Casablanca Stock Exchange during the COVID-19 shock. Using panel data from 2015 to 2021 of non-financial listed firms, we observe that the proportion of dividend cuts during the last seven years (2015–2021) achieved its highest level on the onset of the crisis. Furthermore, results of the ordinary least square (OLS) regressions demonstrate that the COVID-19 shock has negatively affected the dividend payout of Moroccan listed firms. This study implies that, in times of economic crisis, Moroccan firms exhibit risk-averse behavior by prioritizing the retention of earnings over distributing dividends, scarifying, therefore, the transmission of positive signals to investors and external stakeholders. Furthermore, our results reveal that profitability, growth opportunities, leverage, and size are relevant determinants of corporate dividend policy.

Value relevance of audit opinions in an emerging market: evidence from Morocco

Purpose This paper aims to determine whether audit opinions in Morocco, an emerging market, are value relevant to the stock market, through the investigation of the market reaction to the issuance of modified audit opinions (MAOs). Design/methodology/approach The event study approach is used. The data are derived from the financial reports of listed companies on the Casablanca Stock Exchange over a period of 10 years from 2010 to 2019. Findings This paper does not find evidence that the market reacts to the issuance of MAOs when grouped together. When partitioning the sample by types, there is an evidence of a stock market reaction to qualified audit opinions and the qualified audit opinions with observation paragraph when they are combined with a negative variation of earnings per share. Examination of the impact of different natures of qualifications shows no consistent results and that the market does not distinguish between natures of qualifications. Research limitations/implications These results may be due to the fact that some investors have information about the audit opinion long before it is made public, due to privileged access to audit opinions, or that investors underestimate audit opinions relative to other financial indicators. Originality/value This study contributes to the existing literature by investigating an emerging market, not previously tested, after the introduction of several regulatory reforms in Moroccan market aimed at enhancing transparency in financial reporting. It refines the market reaction models used in previous studies by using both ordinary least squares and the Scholes–Williams techniques that correct for the effect of thin trading on the market index. In addition, special attention is given to studying the market reaction to each type of MAOs and to each natures of qualifications.

Economic value added: The best indicator for measuring value creation or just an illusion?

Value creation has become a very important concept in finance. To this end, value creation metrics, like market value added and economic value added have raised the question of their superiority and ability to reflect the true value of organizations, as opposed to the classic accounting indicators like ROE, ROA and EPS. Nevertheless, EVA can only be calculated for listed companies, which makes it difficult to use this indicator to measure value creation for non-listed companies. In this way, some alternatives have been used such as the accounting beta to calculate the return on equity and subsequently the determination of the EVA. Within this framework, the central point of this research is to empirically verify the idea that the normal EVA and EVA calculated using accounting beta are the better measure than traditional indicators to explain MVA. A panel of 32 companies traded on the Casablanca Stock Exchange over the period 2015–2019 was selected for this study. The regression method on panel data was used. The results show that normal EVA is a superior metric than the classical indicators to explain MVA. In addition, the EVA calculated from the accounting beta could be used as a measure adapted to the case of unlisted companies to measure value creation.

Pricing Ability of Carhart Four-Factor and Fama–French Three-Factor Models: Empirical Evidence from Morocco

In this study, the reliability of the Fama–French Three-Factor model (FF3F) and the Carhart Four-Factor model (C4F) is examined thoroughly. In order to determine which of the asset pricing models is the best to explain portfolio returns on the Moroccan share market, these two models are indeed evaluated in the Moroccan market. Additionally, it is worth mentioning that five years of monthly data from the firms that listed on the Casablanca Stock Exchange are used in this research, as well over the period of nine years. The results of this inquiry show that these models barely have a partial hold on the Casablanca Stock Exchange (CSE), which limits their ability to predict the cross-sections of returns. In accordance with this, the C4F model has somewhat greater explanatory power than the FF3F Model. Moreover, our research adds to the body of knowledge by inserting two learned material asset pricing theories to the proof in the market, which is still evolving, and where distinctive anomalistic traits still exist (the CSE).

Moroccan Stock Exchange market topology in crisis and non-crisis periods

This paper seeks to investigate the dynamics within the Moroccan Stock Exchange (MSE) market topology in crisis and non-crisis periods using daily historical log returns of sectoral indices covering the period from January 4, 1993 to September 9, 2021. The study applies the Agglomerative Hierarchical Clustering (AHC) implemented on the Dynamic Time Warping (DTW) distance matrix over ten sub-periods covering numerous crises, from Subprime mortgage crisis to European debt crisis and finally COVID-19 crisis. The obtained clustering results are gathered into a network to display the cumulated interconnections between the sectoral indices. The findings showed that the Casablanca Stock Exchange (CSE) market clusters composition is dynamic during the studied period. Indeed, some sectoral indices demonstrated evidence of strong similarities by gathering in the same cluster over numerous sub-periods as the couples Electrical & Electronic Equipment and Transport or as Banks and Construction & Building Materials sectoral indices. Moreover, the interconnections of CSE sectoral indices are trend dependent. According to the obtained network, the Oil and Gas demonstrated its centrality.

Determinants of Dividend Policy: The Case of the Casablanca Stock Exchange

This article investigates the determinants of dividend policy on the Casablanca stock exchange. The variables tested were based on the main theories of dividend policy, and the fixed effect model was used to test panel data over a period of 16 years from 2003 to 2018. The eight independent variables tested were profitability, firm size, retained earnings, firm age, leverage, growth opportunities, price to earnings (P/E) and a dummy variable introduced for financial companies. To corroborate the results, two proxies were used to test the dependent variable: dividend yield and payout ratio. The results led to the identification of three significant determinants of dividend policy, which are firm age, growth opportunities and firm size. The negative correlation between the variables of firm size and firm age with dividend policy is explained by signaling theory. On the other hand, the negative correlation between growth opportunities and dividend payments is predicted by different theories, such as agency theory, financial flexibility theory and life cycle theory. This study provides insights for investors, analysts and researchers into dividend policy determinants on the Casablanca stock exchange based on firms’ characteristic variables.

Effect of Family Involvement and Corporate Governance on Dividend Policy: A Study of Non-Financial Listed Firms in Morocco

Current research on the determinants of dividend policy has focused on the study of developed countries, while
 research on emerging countries remains limited. The objective of this research is to study the effect of the
 involvement of the family firm on dividend policy. This paper uses Ordinary Least Squares regression, we
 analyzed data for Moroccan nonfinancial firms listed on the Casablanca Stock Exchange over the period
 2015-2017. The results of this paper show that family firm pay less dividends than non-family firms. Thus,
 ownership concentration and firm size influence dividend policy, unlike the composition of the board of
 directors, which doesn’t influence it. Our paper contributes to broaden our understanding of the effect of the
 family firm on dividend policy in one of the emerging countries. It is suggested that the characteristics of
 corporate ownership determine the share of profits to be distributed, not to say dividend policy, since
 concentration of ownership limits the power of minority shareholders to make their voices heard. Despite the
 presence of laws protecting minority shareholders, their room for maneuver remains limited. Our paper
 enriches the existing literature on the family firm dividend policy by studying the Moroccan context. The results
 show that family ownership and family CEO involvement do not have the same influence on the dividend policy
 of family firms, but it depends on the context. Our paper also provides relevant information for practitioners
 regarding dividend policy in Moroccan family firms.

Ethical and Conventional Stock Price Performance: An Empirical Investigation under CAPM-GARCH Models

The present paper aims to examine the financial performance of the Moroccan Ethical, Social and Governance index (ESG10) compared to its conventional counterpart the Moroccan All Shares Index MASI index. The ethical investment is a kind of investment that applies screenings criteria to include or exclude assets from a portfolio. This asset filtering strategy, however, may have additional financial costs compared with traditional investments. Therefore, we will examine the following issue: Does ethical investment impact positively/negatively on corporates’ stock market performances? The study covers the period 2019-2022. To this end, various performance ratios was used and a CAPM-GARCH model was estimated. Our findings indicate that the ethical index is not only more volatile than the conventional peer, but also shows a smaller return. This paper is one of the first studies to tackle comparative performances for the ESG 10 index, which was launched by the Casablanca Stock Exchange in September 2018.