The impact of ISO 26000 social responsibility standard adoption on stock market liquidity: evidence from Saudi Arabia

Hesham Albarrak, Mounir Sarraj, Sourour Ben Saad and Aymen Ajina

International Journal of Economics and Business Research, 2024, vol. 27, issue 4, 607-632

Abstract: This paper aims to investigate the relationship between disclosure about corporate social responsibility through ISO 26000 and stock market liquidity in Saudi Arabia. The study uses a sample of 122 listed firms on the Saudi stock market between 2012 and 2017. Our result shows a positive association between CSR disclosure and stock market liquidity. Specifically, while the CSR index is correlated negatively with quoted and effective spreads, illiquidity ratio is positively correlated with trading volume. So, a higher level of CSR disclosure tends to ameliorate the illiquidity of Saudi firms. These findings are in line with the stakeholder theory and the legitimacy theory that a high level of CSR disclosure is viewed as a positive signal to setup confidence between stakeholders and attract investors to exchange in a transparent market. According to our findings, Saudi regulators should consider the level of CSR disclosures as a serious component to improve market liquidity.

Keywords: corporate social responsibility; CSR; ISO 26000; stock market liquidity; the opportunistic disclosure hypothesis; legitimacy theories; Saudi Arabia. (search for similar items in EconPapers)
Date: 2024
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