New market reforms and stock exchange liquidity: the case of Kuwait


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In developing markets, new regulations are imposed to protect investors, to assure fairness and to enhance trust through controlling all types of market abuse. In addition, these regulations are imposed to enhance the overall market performance and efficiency. Market liquidity is one of the main pillars used to measure market overall performance. In this paper, the authors attempt to analyze market liquidity before and after the passage of the Capital Market Authority Law of 2010 (CMA), aimed at enhancing investors’ confidence and reinforcing better disclosure quality and accountability for Kuwait public companies. By introducing six liquidity measures that captures market depth, turnover, and volatility, the authors documented highly significant deterioration in all the measures following the CMA Law with more profound effect on smaller firms. The researchers concluded that overstated regulations in developing markets, in spite of its goal of improving market overall performance, structure, enhancing investors’ protection, and market integrity, can have an adverse effect on market efficiency.

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    • Table 1. Descriptive statistics for the main variables in pre-post CMA Law
    • Table 2. Summary statistics of all the liquidity measures in the pre-post CMA Law period
    • Table 3. Summary statistics of liquidity measures (trimmed basis) in pre and post CMA period
    • Table 4. Mann-Whitney U test of the five liquidity measures and three trimmed measures
    • Table 5. Student t-test of the five liquidity measures and three trimmed measures
    • Table 6. Results of OSL regression for the liquidity measure PIILL (Model 1)
    • Table 7. Results of OLS regression for the liquidity measure TV (Model 2)
    • Table 8. Summary of hypotheses results testing of market liquidity in pre and post CMA Law period