ABSTRACT

This study examines the effect of non-compliance behavior on the share prices of PSX-listed firms. Based on the Efficient Market Hypothesis (EMH), the analysis of the study employs an event  study methodology  using the mean-adjusted  return model for  47 currently  non- compliant firms during 2014 to 2024. This method treats non-compliance as a significant event in a firm’s life cycle. An estimation window of 180 days is used, along with an event window of 21 days, comprising 15 days before and 5 days after the announcement date. The empirical analysis calculates the abnormal returns and the cumulative abnormal returns. Moreover, a t- test is applied to check the robustness of the model. The findings show that most companies have negative CAR and negative abnormal returns on the event date, suggesting that a non- compliance event has a negative and significant impact on the companies’ share prices. All the T-values are significant at the 10% and 5% significance levels. Furthermore, the study aligns with the semi-strong form of efficiency (Fama, 1970), which suggests that all publicly available information promptly influences share prices. Overall, this study contributes to the literature  on  market  efficiency  and  corporate  performance  in  the  case  of  Pakistan  by demonstrating that regulatory non-compliance  has practical and quantifiable effects on firm valuation.  The  conclusion  emphasizes  that  the  announcement  of  noncompliance  has  a significant impact on the company’s share prices, the PSX rules is relevant however some companies is unpunished for bring noncompliant recommending that there are other reasons too for which companies share price have positive CAR like past experience or loyalty with the noncompliant companies. This study recommends that companies should strictly follow the rules made by PSX  however the rules needs a bit changes ensuring that rules remain relevant  and  effective.  Further  studies  can  be  conducted  on  the  determinants  behind noncompliant companies.