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The Effect Of Financial Ratios On The Firm Value: Evidence From Turkey

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  • Süleyman Serdar KARACA
  • Arif SAVSAR

Abstract

This study examines the effect of financial ratios on firm value. For this purpose, the firms in the sectors of Food-Drink-Tobacco and Basic Metal Industry involved in ISE 100 index are examined. In the study, the relation between firm value and financial ratios are analyzed by panel data analysis. In the analysis 36 firms operating in these sectors between 2002 and 2009 have been analyzed. The dependent variable of the study is firm value; the independent variables are financial ratios. As a result, it has been found out by panel data analysis that financial ratios influence the firm value. There is a significant and positive relation between receivables turnover and firm value; there is a significant and negative relation between inventory turnover and return on equity. No significant relation has been detected between the other ratios.

Suggested Citation

  • Süleyman Serdar KARACA & Arif SAVSAR, 2012. "The Effect Of Financial Ratios On The Firm Value: Evidence From Turkey," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(1(19)/ Sp), pages 56-63.
  • Handle: RePEc:ush:jaessh:v:7:y:2012:i:1(18)_spring2012:p:56
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    References listed on IDEAS

    as
    1. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    2. Ferri, Michael G & Jones, Wesley H, 1979. "Determinants of Financial Structure: A New Methodological Approach," Journal of Finance, American Finance Association, vol. 34(3), pages 631-644, June.
    3. Masulis, Ronald W, 1983. " The Impact of Capital Structure Change on Firm Value: Some Estimates," Journal of Finance, American Finance Association, vol. 38(1), pages 107-126, March.
    4. Anup Chowdhury & Suman Paul Chowdhury, 2010. "Impact of capital structure on firm’s value: Evidence from Bangladesh," Business and Economic Horizons (BEH), Prague Development Center, vol. 3(3), pages 111-122, October.
    5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    firm value; financial ratios; panel data analysis;

    JEL classification:

    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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