Voluntary Disclosure, Enterprise Risk Management and Stock Price Synchronicity : Evidence from Shar¯ı‘ah Compliant and Non-Shar¯ı‘ah Compliant Companies

The study observes that low R2 values from market modelare primarily due to the reflection of firm-specific information in stockprices and not due to noise. The study explores that the extent to whichstock prices become more informative depends upon the availabilityof firm-specific information in the market. The methodology of stockprice synchronicity is applied by using a sample of 30 Shar¯ı‘ah and 30non-Shar¯ı‘ah compliant companies which are taken from KMI 30 and PSX100 indexes. The study explores the impact of Shar¯ı‘ah compliance onstock price synchronicity or informativeness based upon the rationale thatIslam puts emphasis on disclosure and social accountability which shouldreduce the firm’s information asymmetry and improve the stock priceinformativeness. The study reports significant and positive relationship ofShar¯ı‘ah compliance and voluntary disclosure on stock price synchronicitywhich is not according to the hypothesis. The possible reason may be thesize effect which may be moving the firms in line with the market. Moreover, the Enterprise Risk Management (ERM) practices have significantand negative impact on stock price synchronicity. It confirms that ERMhelps in improving the firm’s information environment and stock priceinformativeness