Do Reforms Fix Inefficiency? Evidence of Value and Accrual Anomalies from the Saudi Vision 2030 Era

Abstract

This study investigates the informational efficiency of the Saudi Stock Exchange (Tadawul) during the structural reforms of Saudi Vision 2030 by jointly testing value-glamour and accrual anomalies through the lens of the Adaptive Market Hypothesis. Using an unbalanced panel of 1,545 non-financial firm-year observations over 2010–2024, we apply Fama-MacBeth cross-sectional regressions with lagged accounting variables to prevent look-ahead bias. Size-adjusted returns are regressed on book-to-market (B/M) and total balance-sheet accruals, controlling for size, leverage, and momentum. We find a robust value premium (B/M β = 0.058, p < 0.01) and, notably, a positive relation between lagged accruals and future returns (β = 0.042, p < 0.01). This sign reversal from developed markets suggests that Saudi investors interpret high accruals as a signal of genuine investment and growth rather than earnings management. Both anomalies remain significant when tested jointly, and sub-period analysis reveals that although their magnitude diminished by 30–40% after the 2017 QFI and IFRS reforms, they persist. This persistence, alongside the independence of the two anomalies, indicates that prices do not fully reflect all public information, contrary to semi-strong EMH, and that investors respond to distinct valuation and earnings-quality signals. The findings align with the Adaptive Market Hypothesis: regulatory modernization outpaces the cognitive adaptation of the retail-dominated investor base, making efficiency evolutionary. The study provides the first joint pre- and post-Vision 2030 evidence of a positive accrual anomaly and highlights the continued viability of fundamental, factor-based strategies. It also underscores the need for targeted investor education to accelerate cognitive modernization and close the gap between structural transparency and efficient price discovery.

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