8. Conclusion
There has been limited examination of the association between stock exchange monitoring and firm outcomes. Those that do, capture only limited aspects of stock exchange governance functions (i.e. securities regulation, trading system), and examine their association with a limited range of firm outcomes such as cost of equity and corporate valuation. Thus, this study attempts to fill this gap and adds to this line of literatuer by using macroeconmic factors as adeterminits of stock exchange efficiency which provides a comperhencive measure of efficiency that goes beyond information efficiency. Consequently, this study answers an important research question, whether MENA stock exchanges efficiency influences earnings quality of their listed firms. The results indicate that there is a negative associated between stock exchange efficiency and the absolute value of abnormal accruals (a proxy of earnings quality). These results are in line with the extant literature that documents a positive association between external mechanisms (e.g. Big N auditor firms, banking, and institutional ownership) and earnings quality (e.g. Ahn & Choi, 2009; Gul et al., 2009; Teoh & Wong,1993; Velury & Jenkins, 2006). These findings supported by the propensity score-matching approach, suggesting that firms listed on more efficient stock exchanges have higher earnings quality (lower accruals) than their counterparts listed in less efficient stock exchanges. Meanwhile, this association continues to be evident in the presence of other exogenous factors shown in prior research to affect earnings quality, comprising investor protection, legal origin, and instability resulting from economic and political events.
