Share Valuation Methods And Data Source-Based Accounting In An Emerging Stock Market: The Case Of The Kuwaiti Stock Market

Abstract

This paper uses a questionnaire survey to investigate share valuation methods and the sources of information employed by Kuwaiti investors; it compares the appraisal techniques and the sources of information employed by Kuwaiti investors to those used in other developed and emerging stock markets. The findings suggest that Kuwaiti investors behave like their counterparts in other stock markets; fundamental analysis is the main appraisal technique used by investors; technical analysis and risk analysis are ranked second and third, respectively. However, the usage of technical and risk analysis is much higher in Kuwait. Further, quarterly and annual corporate reports as well as newspapers, the Kuwait Stock Exchange (KSE) website, and charts are commonly studied by investors when valuing Kuwaiti shares. By contrast, communication with company management is not common since executives are usually unwilling to discuss their firm's performance with investors.

Kuwait Stock Market Participants’ Perceptions of Information Useful to the Investment Decisions

“…Furthermore, this study is comprehensive because it investigates Kuwait stock market participants' perceptions of a broad set of corporate information sources-general, financial, nonfinancial, social, corporate governance, and type of valuation methods-useful for investment decisions making. Furthermore, previous research in the field (e.g., Abu-Nassar & Rutherford, 1996;Al-Attar & Al-Khater, 2007;Al Sawalqa, 2012;Almujamed et al, 2012) has shown that different types of investors have used many sources of information; across these studies, no one source was found to be the best or most important source for investors. Therefore, it can be inferred that all the related corporate information sources are useful for investment decision-making.…”

“…This review of prior studies shows that only two studies (Almujamed et al, 2012;Naser et al, 2003) discussed financial information sources and investment decision-making in Kuwait. The current study is different from these two studies.…”

“…A number of research papers (Almujamed et al, 2012;Al Sawalqa, 2012;Alzarouni, Aljifri, Ng, & Tahir, 2011;Zoysa & Rudkin, 2010;Desoky, 2010;Abdelkarim, Shahin, & Arqawi, 2009;Al-Ajmi, 2009;Alattar & Al-Khater, 2007;Al-Tamimi, 2006;Al-Razeen & Karbhari, 2004;Naser, Nuseibeh, & Al-Hussaini, 2003;Bartlett & Chandler, 1997;Abu-Nassar & Rutherford, 1996;Scott & Smith, 1992;Baker & Haslem, 1973) have studied the different types of corporate information for investment decision-making. Results from some of the studies relevant to this one are discussed below.…”

“…More recently, Almujamed et al (2012) examined the share valuation methods and sources of information employed by Kuwaiti investors, using a questionnaire survey. They found that Kuwaiti investors behave like their counterparts in developed and emerging stock markets; fundamental analysis is the main appraisal technique used by investors; technical analysis and risk analysis are ranked second and third respectively.…”

“…Foreign investors may thus own shares in existing Kuwaiti companies or acquire them in those that may be established in the future. Thus, it is expected that Kuwait will continue to attract the consideration of global investors (Almujamed, Fifield, & Power, 2012).…”