Behavioral and accounting determinants of sustainable trading activity in gulf financial markets evidence from the Muscat stock exchange

Abstract

This study examines how behavioral and cultural factors influence trading activity at the Muscat Stock Exchange (MSE) in the Gulf region, while also highlighting the implications of these dynamics for fostering sustainable financial market development. Using behavioral finance theories and Hofstede’s cultural dimensions, the research focuses on the effects of collectivism and uncertainty avoidance on investor behavior, drawing on survey data from 100 investors and secondary data from 30 listed firms. Behavioral variables were measured using a five point Likert scale, with firm size, financial leverage, and Tobin’s Q included as control variables in a multiple regression model. The findings reveal that collectivism has a positive and statistically significant effect on trading activity, suggesting that reliance on social networks and shared information can enhance transparency and inclusive participation, both of which support long term market sustainability. In contrast, uncertainty avoidance exerts a negative influence, indicating that strong risk aversion reduces trading activity and may constrain liquidity, a key component of resilient and sustainable capital markets. By integrating sustainability considerations into the analysis of cultural and behavioral determinants of trading behavior, this study contributes novel insights into how investor psychology shapes market dynamics in an emerging economy such as the MSE and underscores the importance of behavioral factors in building stable, efficient, and sustainable financial systems.