Investors risk perception effect on share prices: A case study on Kuwaiti cement companies
Sundus K Al-Yatama, Musaed S AlAli, Noora F Alibrahim and Afrah J Al Abdulhadi
The aim of this study is to examine investors risk perception effect on the share prices of Kuwaiti cement companies listed at Kuwait stock exchange (KSE) over the period 2010-2018. The risk perception is driven by investors’ expectations on the future financial soundness of companies they invest in. As a result, when investors have negative expectations this would lead them to reduce their investment in these companies resulting in lower share prices and vice-versa. In this research Zmijewski x-score model is used as risk proxy to evaluate the financial soundness of Kuwaiti cement companies and its effect on their share prices. The research uses ordinary least square regression (OLS) to examine the relation between x-score and the share prices. While OLS regression is used to examine the relation between the variables that relation does not necessarily imply any cause-and-effect relationship. For that matter Granger causality test was used to examine the cause-and-effect relationship. Results obtained from this study showed that Kuwaiti cement companies had a strong financial positions and are safe from bankruptcy, at least for the next two years. The research also revealed that there is a statistically significant relation between Zmijewski x-score and the stock price but at the same time Granger causality test showed that Zmijewski x-score does not cause the movement in the price of the share.
Sundus K Al-Yatama, Musaed S AlAli, Noora F Alibrahim, Afrah J Al Abdulhadi. Investors risk perception effect on share prices: A case study on Kuwaiti cement companies. Int J Res Finance Manage 2020;3(1):07-12.