The ability of efficiency and effectiveness indicators in explaining stock price performance: evidence from Palestine Exchange. رسالة ماجستير

Abstract

This study examines the ability of efficiency and effectiveness indicators to explain stock price performance in the Palestine Exchange (PEX) during the period 2015–2024. The analysis focuses on three efficiency ratios—inventory turnover (IT), accounts receivable turnover (ART), and accounts payable turnover (APT)—and three effectiveness measures—return on sales (ROS), return on assets (ROA), and return on equity (ROE)— while accounting for firm size, firm age, and economic sector as control variables. The research employs a purposive sample of 21 non-financial firms representing the industrial, services, and investment sectors, generating 210 firm-year observations. Given that normality tests (Kolmogorov–Smirnov and Shapiro–Wilk) indicated significant deviations from normality, non-parametric methods (Spearman correlations and Kruskal–Wallis tests) were applied alongside multiple regression models to ensure robust inference. The results revealed that efficiency indicators did not exhibit a statistically significant impact on stock prices, suggesting that short-term operational management is not a strong determinant of market valuation in PEX. Conversely, effectiveness indicators demonstrated significant associations with stock prices at the model level, although individual coefficients for ROA and ROE were weakened by multicollinearity. Control variables (firm size, firm age, and sector) did not materially alter the relationships, underscoring the limited role of structural firm characteristics in a thin and politically sensitive market. IV The findings contribute to the literature by highlighting the weak pricing role of efficiency ratios in frontier markets and the partial relevance of profitability indicators in explaining stock price movements. This suggests that investors in PEX place greater emphasis on broader financial effectiveness and external macroeconomic conditions than on operational turnover metrics. The study provides practical implications for investors, corporate managers, and policymakers, emphasizing the need for enhanced market transparency and liquidity to improve the informational efficiency of PEX