Many literatures studied the relationship between the leverage and the value of firms. Some studies found no relationship and other studies show that the relationship is positive, however, another studies show that the relationship is negative. Therefore, the leverage-value relationship seems to be an unresolved puzzle in the capital structure empirical literature.Therefore, this study seeks to examine the leverage-value relationship to interpret the significant and the direction of this relationship by using the effect of industry, size firm's growth opportunities and adding operating efficiency as controlling factors. The importance of this study is to investigate the impact of unique status of the Saudi market companies that have not tax on its profits and illustrate whether the leveragevalue relationship hold in the Saudi companies. Moreover, this study seeks to help managers make efficient financial decisions and realize the effect of their decisions on the firm value with considering the impact of industry and the internal level of firm performance such as their growth opportunities and their operating efficiency on the leverage-value relationship.The results show that leverage for both firm and industry (book or market) as well as the difference between firm leverage and the industry leverage have a significant negative effect on both the firm value and the difference between firm value and the industry value. These results are found in spite of the difference among firms in growth opportunities or in operating efficiency.
This paper compares and evaluates the performance of eight different multifactor assetpricing models to identify and explain Anomalies in Saudi stock market (SSM). Data set of daily stock prices and returns are collected for all companies that issue shares (152 companies) which represent all sectors in the SSM during the period from 2009 to 2013. The 25 size-BE/ME portfolios are formed by the intersection of size and BE/ME quintiles (5x5 Size-BE/ME sorts). The empirical results show that each of capital asset pricing models CAPM, the Fama-French three-factor model, the Cahart model, the four factor model of Chan and Faff four factor model and the five -factor model (Adding liquidity to four factor model) have coefficients of the factors (Bp, Sp, hp, wp and L ) to be significantly different from zero. Furthermore adjusted R 2 s range from 29% to 78% but all of them produce an intercept that is significantly different from zero for 12-16 portfolios. However, by adding leverage and test the six-factor asset pricing model, the evidence confirms the significance of this model to explain return variation with adjusted R 2 ranges from 39% to 83% and the intercept are not significant for 17 portfolios out of 25. Moreover, the results of testing six-factor model by adding standard deviation of residualprovide supportive evidence to the six-factor model.
This research aims to analyze trader's types and their behavior in the Saudi stock market. The study classifies traders to identify the structural component of the stock market and to test the significant of difference in their behavior and their reactions to the movement of stock prices. One Way ANOVA analysis used to demonstrate significant differences among the traders' behavior according to price variability, facing loss and trust in specific stock. The results described that 60% of the total traders in the sample are investors ,while the percentage of speculators are 40% , this help to analyze and interpret the impact of this distribution relative on the share trading in the Saudi stock market. On the other hand, the results shown that there are significant differences among their behavior towards price rise or reduction, as well as their reactions towards facing loss. Also there are significant correlation between the types of traders and their reactions to the share prices movements. In addition, the results indicate to increase the ratio of traders who face loss. Since traders ratio that face loss is (86 %), while the ratio of traders that not face loss is (14 %). Meanwhile there is no significant difference between their behavior when they believe (trust) of stock and expect to achieve more of it.
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