Voluntary Disclosure, Enterprise Risk Management and Stock Price Synchronicity: Evidence from Shariah Compliant and Non-Shariah Compliant Companies

Zeeshan Ghafoor & Arshad Hassan
Published Online: June 2018

The study observes that low R 2 values from market model are primarily due to the reflection of firm-specific information in stock prices and not due to noise. The study explores that either the extent to which stock prices become more informative depends upon the availability of firm- specific information in the market. The methodology of stock price synchronicity is applied by using a sample of 30 Shariah and 30 non-Shariah compliant companies which are taken from KMI 30 and PSX 100 indexes. The study explores the impact of Shariah compliance on stock price synchronicity or informativeness by having a rational that Islam puts emphasis on disclosure and social accountability which should reduce the firm’s information asymmetry and improve the stock price informativeness. The study reports significant but positive relationship of Shariah compliance and voluntary disclosure on stock price synchronicity which is not according to hypothesis. The possible reason may be the size effect which moves the firms in line with market. Moreover, ERM practices have significant and negative impact on stock price synchronicity which confirms that ERM helps in improving the firm’s information environment and stock price informativeness.


Voluntary Disclosure, Enterprise Risk Management, Stock Price Synchronicity, and Shariah Compliance.