Egyptian Stock Market Research Articles

Determinants of Herding Behavior in The Time Of COVID-19: The Case of Egyptian Stock Market Sectors

This paper attempts to research in two parts, the first part aims to study the Herding Behavior in the sectors of the Egyptian Stock Exchange, when the second part aims to study the factors that affect the Herding Behavior according to the identification of those factors. Factors based on the presentation of previous literature related to herd behavior, and these factors are represented in the exchange rate, Stock trading volumes as an indicator of Liquidity, stock market returns, and indicators of the spread of the Corona virus represented in the number of cumulative cases and deaths according to the population in Egypt. During the period from 1/3/2020 to 31/7/2020. Sectors are five sectors of 76 companies, that have dispersion decrease (CSSD), and the sectors are (Basic Resources, Banks, Travel & Leisure, Health Care & Pharmaceuticals, Food, Beverages and Tobacco). The results of the multiple regression models for the sectors in which herd behavior appeared were as follows: - Basic resources determination coefficient (R2) (52.24%), and the variables determining herd behavior in the sector are variables (Corona virus Cumulative Cases, Cumulative Corona virus deaths).- Banks determination coefficient (R2) (66.85%), and the variables determining herd behavior in the sector are variables (Stock Market Return, Sector Trading Volumes, Corona virus Cumulative Cases, Cumulative Corona virus deaths).- Travel & Leisure determination coefficient (R2) (49.04%), and the variables determining herd behavior in the sector are variables (Stock Market Return, Exchange Rate, Sector Trading Volumes, Corona virus Cumulative Cases, Cumulative Corona virus deaths).- Health & Care Pharmaceuticals determination coefficient (R2) (41.84%), and the variables determining herd behavior in the sector are variables (Exchange Rate, Corona virus Cumulative Cases, Cumulative Corona virus deaths).- Food, Beverages and Tobacco determination coefficient (R2) (58.87%), and the variables determining herd behavior in the sector are variables (Stock Market Return, Sector Trading Volumes, Corona virus Cumulative Cases, Cumulative Corona virus deaths).

The impact of related party transactions on firm value

PurposeThe purpose of this study is to address the impact of the related party transactions (RPTs) on firm value. The authors bring evidence from a usually ignored empirical setting: an African emerging market.Design/methodology/approachIn particular, the authors focus on companies listed on the Egyptian stock market using a sample of EGX 30 from 2012 to 2017.FindingsUnlike the literature, the authors find no significant relationship between RPTs and market value.Practical implicationsThis research provides insights for policymakers and other interested parties concerning the perception of RPTs in Egypt.Originality/valueThe reported different findings of this study assure the intermediary role of the context and the local culture in the relationship between RPTs and firm value, in contrast to the negative view that is mostly reported in the literature.

The financial and market consequences of environmental, social and governance ratings

PurposeThis study aims to examine the combined impact of environmental, social and governance (ESG) ratings on the market and financial performance of Egyptian companies during the period from 2007 to 2016 and, thereby, determines the influence of the recent political revolutions –that broke out in the MENA region in early 2011 – on the association between ESG practices and corporate performance.Design/methodology/approachThe present work uses data from the S&P/EGX ESG index, which is the first of its kind in the MENA region. The ESG index is designed to increase the profile of companies listed on the Egyptian Exchange and is expected to boost the level and quality of ESG practices in the Egyptian context. The sample includes the 100 most active Egyptian companies in the Egyptian Stock Exchange as measured by the EGX 100 index in the financial year that ended in 2016. The sample begins in 2007, concurrent with the start of the ESG index, and ends in 2016. The period from 2007 to 2010 represents the pre-revolution period, and the period from 2012 to 2016 is the post-revolution period.FindingsFirms with high ESG ratings are found to enjoy a better financial and market performance. The authors found some evidence that the influence of ESG ratings on financial performance is more obvious after the revolutions than before the revolutions.Practical implicationsThis study provides insights regarding the impact of political events on the market in the Middle East region. Despite its increasing economic and political importance, this region still suffers from inadequate attention in the literature. The present work investigates the variances that evolved out of the events that started in early 2011 and the implications of these events on the market. The results of this study have implications for regulators and investors in the Egyptian stock market. The authors believe that the relatively new S&P/EGX ESG index provides a way to enhance ESG ratings in Egypt.Social implicationsThe results of the present study provide insights for policymakers regarding the usefulness of the sustainability indices.Originality/valueThe present results contribute to the growing literature on the economic consequences of ESG ratings, especially in relation to a context characterized by intense political/revolutionary changes. In particular, this study contributes to the few works that have addressed the economic implications of ESG ratings in emerging markets.

The Relationship between CSR and Corporate Financial Performance & Stock Performance: An Applied Study on the Egyptian Stock Market

The Relationship between CSR and Corporate Financial Performance & Stock Performance: An Applied Study on the Egyptian Stock Market

Does Financial Inclusion Improve the Financial Performance of Commercial Banks in Egypt?: Pooled OLS Approach

Financial inclusion is gaining acceptance in Egypt as a prominent policy toward the economic reform during the last few years. However, there is relative dearth of em1 pirical studies examining the impact of financial inclusion on the performance of banks in Egypt. This paper fills this gap. Using Pooled Ordinary Least Square (OLS) of six commercial banks listed in the Egyptian stock market over the period from 2013 to 2018, this study empirically investigate the impact of financial inclusion on the performance of Egyptian banks measured in terms of Return on Assets (ROA) and Return on Equity (ROE). Financial inclusion is measured subject to two main dimensions- the access to financial services and utilization of bank account and its related financial services. Due to the difficulty of getting data, the usage dimension is taken for the side of individuals only and ignores SMEs such as credit card; loan; deposit for SMEs. Results showed that financial inclusion positively contribute to banks’ ROA and ROE.

The Application of Two-Stage Approach in Evaluating Domestic Mergers and Acquisitions Performance Efficiency in Egypt

The main aim of this research is to measure the impact of domestic Mergers and Acquisitions (M&As) on firm's performance and to determine M&As success and failure factors (i.e. weight efficiency, difference in efficiency, return on assets and return on equity) in the whole Egyptian market. The researchers used two-stage analysis; Data Envelopment Analysis (DEA) in the first step and censored regression technique (Tobit model) in the second step for sample of 21 firms listed in the Egyptian stock market (EGX) for 23 operations within the period from 2003 to 2015. The research found that there is enhancement in performance efficiency post M&As in both financial and non-financial sectors. The results showed significant relationship between both ROA and ROE with M&As performance efficiency indicating that these two factors are the most success factors affecting M&As performance efficiency. Results found that there is insignificant relationship between difference in efficiency and M&As performance efficiency.

The Economics of the Egyptian Stock Market and the Financing of Tourism and Hospitality Projects: A Comparative Study of some Arab Stock Markets

Stock Markets are an important part of the economics of the Arabian countries. Securities tradedon a stock exchange include stock issued by listed firms and bonds. The current study aims toinvestigate the effect of Stock Split on Market Capitalization and Market Value in Hospitalityand Tourism in three Bourses. For the purpose of the study, determinations of whether StockSplit made by Hospitality and Tourism Sector Index’s firms on the Egyptian Exchange, SaudiArabian Stock Exchange and Bahrain Bourse have an effect on the splitting firms. The study useshistorical quantitative data during the period (2010:2018) collected from (ASMs). Based onlinear regression analysis, the findings in Travel and Leisure Index in The Egyptian Exchangeindicated that there is a significant positive relationship effect of Stock Split on MarketCapitalization, Market Value, and Market Value on Market Capitalization. Furthermore, theresults showed that in Tourism and Hotels index in Saudi Arabian Stock Exchange there is asignificant positive relationship effect of Stock Split on Market Capitalization, Market Value,and Market Value on Market Capitalization. In addition, the results showed that in Hotels andTourism in Bahrain Bourse there is a significant positive relationship between of Stock Split onMarket Capitalization, Market Value, and Market Value on Market Capitalization. The resultsalso revealed that Stock Split on Market Capitalization, Market Value, and Market Value onMarket Capitalization was considered the most criterion validity in the three Bourses.

The Impact of January Events on Stock Performance in the Egyptian Stock Market

The aim of this paper is to evaluate the impact of the January25 revolution on stock performance in the Egyptian market during 2010–2012 by analyzing its effects on trading volume, market return fluctuation, and closing price. These variables are analyzed pre- and post-January25 revolution using the descriptive statistics group unit root test, cointegrating equation model, GARCH model, and ARCH model. The results indicate that there is a significant positive relation between the January events and return fluctuation and no significant effect between the January events and trading volume; however, the trading volume decreased before, during, and after these events, and there is a significant negative relation between the January events and closing price.

Are Sustainable Firms More Profitable? Evidence From Egypt

The purpose of this study is to investigate the association between adopting sustainability practices by Egyptian companies and their level of profitability. Three hypotheses were tested, the first concerned whether sustainable firms achieve higher levels of market value of equity than non-sustainable firms, the second involved whether sustainable firms have higher levels of return on equity compared to non-sustainable ones, and the last was about the amount of cash dividends paid by sustainable firms to their stockholders as opposed to non-sustainable ones. The population of 221 Egyptian companies listed in the Egyptian stock market in the year 2015 was used to test these hypotheses. The results demonstrate that sustainability practices are associated with higher level of both market value of equity and return on equity. Furthermore, cash dividends paid to stockholders are proven to be higher for sustainable firms.

The Impact of Corporate Governance on the Value of the Company in the Egyptian Stock Market

This research aims to examine the relationship between corporate governance and the value of the company in the stock market, using a sample of non-financial companies listed on the Egyptian stock exchange for the period of four years 2015-2018. The study was conducted on companies registered in the Egyptian stock market, but after the exclusion of financial institutions because they are subject to special rules for disclosure and transparency and oversight, where a sample of non-financial companies will be selected at random. And You will get the necessary data for the applied research through the financial statements and reports of the Board of Directors and reports to the audit committees of listed companies in the Egyptian stock market during the period from 2015 and 2018, and the researcher will depend on the method of regression analysis to test the research hypotheses. The research problem stems from the need to answer the following questions: 1. Does corporate governance affect the level of the company’s performance? 2. Does the performance of the company’s affect value in the stock market? 3. Does corporate governance affect the value of the company in the stock market? The research is aimed at theoretical apartment: to identify the general framework for corporate governance in the light of the latest standards and studies and analyze the most important studies that have looked at the relationship between corporate governance and performance level of the company, as well as studies that looked at the relationship between corporate governance and the company’s value in the stock market in order to benefit from the findings of previous studies in this regard. The paper presents the results of an empirical analysis, studies the impact of corporate governance on the value of the company in the Egyptian stock market, which showed that there is a positive relationship, but not significant between the corporate governance index and the ratio of market value to book value per share, and the results indicate that there is a positive relationship, but not significant between the corporate governance index and the percentage of Tobin’s Q. The results of the research can be useful through its response to the theme, which is a vital and important as it tests the relationship between corporate governance mechanisms and the performance of the company and its value in the stock market with the application in the Egyptian environment. Keywords: corporate governance, firm value, and firm performance.

Modelling Risk on the Egyptian Stock Market: Evidence from a Markov-Regime Switching GARCH Process

This research aims at evaluating among market risk measures to equity exposures on the Egyptian stock market, while utilising a variety of parametric and non-parametric methods to estimating volatility dynamics. Historical Simulation, EWMA (RiskMetrics), GARCH, GJR-GARCH, and Markov-Regime switching GARCH models are empirically estimated. Value at Risk and Conditional Value at Risk measures are backtested in order to evaluate among the alternative models. Results indicate the superiority of asymmetric GARCH models when combined with a Markov-Regime switching process in quantifying market risk - as is evident from the results of the backtests - which have been performed in accordance with the current regulatory demands. Implications are important to regulators and practitioners.

Exploring Improvements of Post-Acquisitions Corporate Performance in Industrial Sector in the Egyptian Stock Market

The purpose of this study is to examine the impact of Egyptians Acquisitions on the post-performance of the acquired companies from the period of 2003 to 2015 by the use of event study methodology. This is done by studying the financial post-performance (includes: liquidity, activity, profitability and capital structure ratios) of a sample consists of 17 companies from the industrial sector as dependent variables, and comparing their results with the pre-performance and the acquisition event as an independent variable. By using a non-parametric Mann-Whitney-Test that can replace the unpaired t-test in the case of small samples, in addition to the factor analysis. The Study tests the significant difference between performance of the acquired companies before and after the acquisition. Empirical results for the whole sample showed a negative significant difference between both the profitability and the capital structure performance of the acquired companies before and after the acquisition. On the other hand, it showed an insignificant difference between both the liquidity and the activity performance of the acquired companies before and after the acquisition. Studying the sub-industrial sectors shows that the Industry Sector has an impact on the performance of the acquired companies and that appears in The Basic Resources and Utilities Sub-sector liquidity, profitability and capital structure performance and has no impact on financial activity performance. For the Construction and Materials Sub-sector there is no impact on the liquidity, profitability and financial activity performance. However, there is a significant impact on the capital structure. For the Personal and Household Products Sub-sector, there is a significant impact on profitability performance, and there is no impact on liquidity, financial activity, and capital structure performance. For the Food, Beverages and Pharmaceutical Sub-sector there is no impact on the liquidity, profitability and financial activity performance and there is a significant impact on capital structure performance. By studying the impact of the Capital Issued on the post-performance of the acquired companies, the researcher showed that there is an impact on the capital structure performance for the acquired companies below 50 M and on profitability performance above 50 M issued capital. On the other hand, there is no impact on the other performance measures for companies above and below 50 M issued capital. Finally, the study results introduced some useful recommendations for the acquisition events in the Egyptian Market.

The Impact of Exchange Rate Volatility on Stock Prices: A Case Study of Middle East Countries

The exchange rate is not only a determinant of economic activity but also a factor affecting the performance of stock market. In other words, the exchange rate volatility makes an impact on the stock market of any economy. This study has attempted to determine the relationship between exchange rate and stock prices of Middle East countries, using the GARCH model for the period Jan-2004 to Apr-2018, to make an econometric analysis. In this context, various time series analysis and Granger causality test were applied. Results of analyses show a strong evidence of causation running from exchange rate to stock prices; implying several variations such as Dubai stock prices experienced exchange rate volatility while the Saudi stock market witnessed a unidirectional relationship running from stock prices to exchange rate implying that variations the Saudi exchange rate determines the stock prices volatility. Finally, in the Egyptian stock market, no relationship between the exchange rate and stock prices was witnessed which means that changes in Egyptian stock prices cannot be explained by the volatility in the exchange rate.

The Role and Importance of Financial Management in the Urban Development with the Light of the Impacts of Real Estate Market in Developing the Economic Growth in Egypt

This paper adopts an inductive research approach and is divided into three sections. The first section is a theoretical inductive overview of Economics Market in Egypt and discusses the role of financial markets in resources mobilization and division of financial market in Egypt. Aiming to read the current situation of the Egyptian economic market. The second section describes the key players in the capital market by reviewing the role of financial markets economic growth. The third part introduces the reading in the real estate market in Egypt with Real Estate’s Big Picture. The overall economic sector has a number of distinctive focal points, one of which is real estate, a primary sector of the economy. Between 30% and 50% of high and middle-income assets consist of real estate property and the percentage is even higher for lower-income Egyptian families. Moreover, the market capitalizations of land corporations publicly listed on the Egyptian Stock Market has been boosted by double-digit revenue growth, and the real estate sector has also been growing markedly at the macro level; with a growth rate exceeding 20%, its overall contribution to GDP has surpassed 10%. It is to be noted that the Egyptian real estate market is not one uniform sector; it is divided between principal residences located in Greater Cairo (mainly dominated by large and mid-scale developers), vacation homes on the coast (assorted real estate developers) and real estate in other areas across the country (generally developed by individual owners). Finally, with the results and recommendations, we will find that as a part of the whole urban development it is a very important part of the economic growth of Egypt.

A Hybrid Fuzzy-Neural Model for Pattern Detection to Predict the Egyptian Stocks Price Movement Direction

In this paper, a hybrid fuzzy-neural system for Egyptian stocks price prediction is proposed. The model helps choosing the right stock mixture with the highest profit within a certain risk factor. A hybrid fuzzy-neural system is applied to significantly save effort and time of portfolio managers. The model increases the individual investors’ local market understanding by providing buy and sells signals that reflect market sentiments, breaking news and technical analysis expectations. An implemented system of the proposed model has demonstrated a promising performance of the applied test datasets containing 100 Stock Symbols over the past 9 years (January 2009-July 2018). The prediction accuracy of the model is computed by comparing the applied system predicted results against the actual results of the Egyptian stock market during the test period.

Investigating the Relationship Between Ownership Structure and Investment Efficiency in Emerging Markets: Evidence From the Egyptian Stock Market

This paper aims to examine the relationship between Ownership Structure Mechanisms (Managerial Ownership, Institutional Ownership, Block holder Ownership and Outside Director Ownership) and Investment Efficiency by using panel data analysis. To investigate this relationship used the multiple regression models. Findings of investigation of 35 firms listed on the Egyptian Stock Exchange in the period 2006 to 2015 by balanced Panel model representative. Results indicated that Managerial Ownership isn’t related with investment efficiency. In contract, institutional ownership, block holder ownership and outside director ownership have a negative relationship with investment efficiency. In addition, the researcher found that control variables (Firm size, Debt ratio, Tobin’s Q) not related to investment efficiency. These findings imply that the Majority of Egyptians firms relies on institutional without individual ownership and then reduces much of possible from agency problems and decreasing information asymmetry and facilitating the monitoring of investment decisions.

Audit firms and industry specialization in an emerging economy

PurposeThis study aims to investigate the implications of audit industry specialization on auditor’s retention and growth within an emerging economy. Factors such as whether the firm is a Big 4, a firm with international affiliation, a local firm and the type of industry were studied to analyse the reasons behind audit firm retention and growth.Design/methodology/approachThis research is based on a field study related to audit firms providing services to listed companies in an emerging economy. The sample includes the top 100 publicly held companies’ in the Egyptian stock market during 2006-2011 for which their annual reports are analysed to determine the audit firms’ retention and growth. An assessment of the continuity of the auditors and the increase in the number of audit clients were also measured.FindingsThe results confirm that industry specialization has an important effect on the auditor’s retention, especially for industries where capital investment is significant such as buildings, construction, financial services, housing and real estate. Big 4 audit firms retained their clients because of their industry specialization and brand name. Evidence was found that good knowledge of accounting and auditing standards resulted in audit firms with international affiliation competing with the Big 4 for clients’ retention and growth.Originality/valueThis study contributes to the existing literature, as it is among the first to provide empirical evidence on auditor retention, growth and auditor’s dominance in an emerging economy such as Egypt.

Predictors of Investors’ Participation in the Egyptian Stock Market: Application of Theory of Planned Behavior

Despite the opportunities of growth for the Egyptian stock market, it still offers limited potential to attract investors. This paper explores how various factors related to attitudes, subjective norms and perceived behaviour control as indicted by the theory of planned behaviour affect stock market participation (SMP) in the emerging market of Egypt. The aim of this paper is to study how the influence of factors as financial literacy, risk, influence of others, confidence in the regulator among others, affect consumers’ investment decision to participate in the stock market. A pilot study when combined with literature review revealed eight factors that might affect the investors’ intention and behaviour in the Egyptian stock market. The study then apply TPB to develop a comprehensive model to include the most important factors that may have a strong potential to enhance the equity holding behaviour and explain SMP in the emerging market of Egypt; a market with a lot of potential but rarely studied. This model can be further tested across different developing markets as well. The study concluded that investment intention could predict the actual investment in the stock market (which represents behaviour). Nevertheless, the behaviour is not determined by only those factors tested. Other moderating factors (as change in interest rates, taxes, transaction costs…) can be examined to test the effect on SMP, which opens the room for future research.

The value relevance of accounting information including intangibles A comparative applied study of Companies Listed in the Egyptian stock market based on ownership structure

This study aims to examine the value relevance of accounting information for companies listed in the Egyptian stock market and the incremental increase in the explanatory power of accounting numbers resulting from the recognition of intangible assets and RD i.e. the less concentrated the firm’s ownership structure, the higher the value relevance of accounting information represented by the positive significance of earnings and book value of equity. In contrast, high concentrated ownership structures showed lower levels of value relevance with earnings numbers becoming more significant. Intangibles did not show any significance or value relevance in either of the two ownership structures.

Impact of behavioral factors on investors’ financial decisions: case of the Egyptian stock market

PurposeThis paper aims to investigate the relationship between investors’ demographic characteristics (age, gender, education level and experience) and their investment decisions through behavioral factors (sentiment, overconfidence, overreaction and underreaction and herd behavior) as mediator variables in the Egyptian stock market.Design/methodology/approachThis paper collects data from a structured questionnaire survey carried out among 384 local Egyptian, foreign, institutional and individual investors. This paper used a partial multiple regression method to analyze the effect of investors’ demographic characteristics on investment decisions through behavioral factors as the mediator variable.FindingsInvestor sentiment, overreaction and underreaction, overconfidence and herd behavior significantly affect investment decisions. Also, age, gender and the level of education have significant positive effects on investment decisions by investors. Experience does not play a significant role in investment decisions, but as investors gain experience, they tend to overlook the emotional factors.Practical implicationsThe findings of this paper would help to understand common behavioral patterns of investors and indicate a path toward the growth of the Egyptian stock market.Originality/valueThere is a lack of research in behavioral finance covering Middle East and North African markets. This paper attempts to fulfill the gap by analyzing behavioral factors in the Egyptian market.