Market Access Liberalization, Accounting Information Quality and Trading-Activity Reallocation in Tadawul: Evidence from the Abolition of the Qualified Foreign Investor Framework

Abstract

This paper examines whether the Saudi Capital Market Authority's January 2026 abolition of the Qualified Foreign Investor (QFI) framework coincided with a measurable redistribution of trading activity across listed firms in Tadawul. Using official Saudi Exchange reports, we construct a near-population panel of 267 to 269 firms observed at annual, quarterly, monthly, and daily frequencies spanning 2025 and Q1 2026. The empirical design is framed as event-based evidence around a major market-access reform rather than as a clean natural experiment. We combine cross-sectional OLS, liquidity-sorted portfolio tests, quantile regression, event-window difference-style comparisons, placebo tests, and heterogeneity analyses to trace how activity and returns evolved around the reform window. Three findings organize the results. First, the strongest evidence concerns market activity rather than broad repricing: firms that were more liquid before the reform experienced a statistically significant relative decline in turnover and trade counts during the reform window, with the sharpest adjustment concentrated in the mid-cap segment. Second, the relation between prior liquidity and subsequent returns is heterogeneous across the conditional return distribution rather than monotonic in the mean. Third, placebo, falsification, treatment-definition, and clustering exercises all support the interpretation that the reform window coincided with a redistribution of trading attention away from previously dominant names and toward a broader cross-section of firms. The paper contributes to the literature on capital markets, market microstructure, and market-access reforms in emerging economies by showing that liberalization may first appear in the allocation of trading activity before it appears in average-return differentials. The evidence is therefore most informative about trading-activity reallocation, while causal interpretation remains cautious because treatment is not exogenous, the transition begins before full implementation, and the post-reform horizon is short.