International Journal of


EISSN: 2313-3724, Print ISSN: 2313-626X

Frequency: 12

line decor
line decor

 Volume 10, Issue 6 (June 2023), Pages: 113-118


 Original Research Paper

Price behavior of small and medium enterprises on the Saudi stock exchange in the face of market illiquidity


 Héla Bensoltane 1, 2, *


 1College of Business Administration, University of Ha’il, Ha’il, Saudi Arabia
 2Univ. Manouba, ESCT, LARIMRAF LR21ES29, Campus Universitaire Manouba, 2010, Tunisie

  Full Text - PDF          XML

 * Corresponding Author. 

  Corresponding author's ORCID profile:

 Digital Object Identifier:


This research examines the impact of market illiquidity on asset prices. This topic has been widely discussed in the U.S. market, particularly in relation to the effects on small-caps and large-caps. The objective of this study is to investigate the relationship between returns and market illiquidity shocks on the Saudi stock exchange, with a specific focus on medium and small capitalizations. Small and medium enterprises (SMEs) in Saudi Arabia play a significant role in driving economic growth, comprising 99.5% of the private sector. Given their importance in diversifying the Saudi economy and enhancing non-oil sectors, it is crucial to examine how the stock prices of these enterprises respond to market liquidity issues. To achieve this, illiquidity shocks are estimated for the Saudi stock exchange, followed by an assessment of the overtime relationship between SME returns and the estimated shocks using seven industrial group portfolios. The estimation results validate previous findings and demonstrate that illiquidity shocks in the Saudi market lead to lower prices for all SMEs, irrespective of their industrial group. Moreover, I explore whether this relationship differs between medium and small enterprises. Previous studies have suggested that market illiquidity shocks have a more pronounced impact on the stock prices of small capitalizations compared to large capitalizations. However, my estimation results indicate that the negative effects of illiquidity shocks on stock prices do not significantly differ between medium-sized and small-sized enterprises. This finding is attributed to the lack of substantial disparities in the time-series returns of both portfolio sizes.

 © 2023 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (

 Keywords: Asset prices, Market illiquidity, Small-caps and large-caps, Saudi stock exchange, SMEs

 Article History: Received 30 October 2022, Received in revised form 4 April 2023, Accepted 17 April 20233


No Acknowledgment.

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.


 Bensoltane H (2023). Price behavior of small and medium enterprises on the Saudi stock exchange in the face of market illiquidity. International Journal of Advanced and Applied Sciences, 10(6): 113-118

 Permanent Link to this page


 Fig. 1 Fig. 2


 Table 1 Table 2 Table 3 


 References (13)

  1. Acharya VV, Amihud Y, and Bharath ST (2013). Liquidity risk of corporate bond returns: Conditional approach. Journal of Financial Economics, 110(2): 358-386.   [Google Scholar]
  2. Alharbi RK (2022). Saudi Arabia’s small and medium enterprises (SMEs) sector post-COVID-19 recovery: Stakeholders’ perception on investment sustainability. International Journal of Organizational Analysis.   [Google Scholar]
  3. Allmnakrah A and Evers C (2020). The need for a fundamental shift in the Saudi education system: Implementing the Saudi Arabian economic vision 2030. Research in Education, 106(1): 22-40.   [Google Scholar]
  4. Amihud Y (2002). Illiquidity and stock returns: Cross-section and time-series effects. Journal of Financial Markets, 5(1): 31-56.   [Google Scholar]
  5. Amihud Y (2019). Illiquidity and stock returns: A revisit. Critical Finance Review, 8: 203–221.   [Google Scholar]
  6. Amihud Y and Noh J (2021). Illiquidity and stock returns II: Cross-section and time-series effects. The Review of Financial Studies, 34(4): 2101-2123.   [Google Scholar]
  7. Bekaert G, Harvey CR, and Lundblad C (2007). Liquidity and expected returns: Lessons from emerging markets. The Review of Financial Studies, 20(6): 1783-1831.   [Google Scholar]
  8. Ben Soltane H and Naoui K (2021). Time‐varying responses of stock returns to market illiquidity: Stress scenario with regime‐switching framework. International Journal of Finance and Economics, 26(1): 1611-1622.   [Google Scholar]
  9. Ben Soltane H, Naoui K, and Alshammari A (2022). Systematic illiquidity, characteristic illiquidity, and stock returns: Time series analysis. International Journal of Advanced and Applied Sciences, 9(2): 72-80.   [Google Scholar]
  10. Lee KH (2011). The world price of liquidity risk. Journal of Financial Economics, 99(1): 136-161.   [Google Scholar]
  11. Lesmond DA, Ogden JP, and Trzcinka CA (1999). A new estimate of transaction costs. The Review of Financial Studies, 12(5): 1113-1141.   [Google Scholar]
  12. Pástor Ľ and Stambaugh RF (2003). Liquidity risk and expected stock returns. Journal of Political Economy, 111(3): 642-685.   [Google Scholar]
  13. Watanabe A and Watanabe M (2008). Time-varying liquidity risk and the cross section of stock returns. The Review of Financial Studies, 21(6): 2449-2486.   [Google Scholar]