Determınatıon of the relatıonshıp between fınancıal rısks and fırm value: An applıcatıon on ıstanbul stock exchange companıes

Abstract

This study is aimed at revealing the relationship between financial risks and firm value. In this context, the data from the firms, whose shares are continuously traded on Borsa Istanbul 100 Index between 2012-2017, is analyzed by the panel data analysis. Financial risks are represented by interest, capital, currency, liquidity and credit risks. Firm value is measured by Tobin Q, Market Value/Book Value and Price/Earning ratios. Within the scope of the analysis, three different models are specified. In the first model, while a negative and significant relationship was found between capital and liquidity risks and Tobin Q, no significant relationship was observed with currency, credit and interest risk. In the second model, while a negative and significant relationship was found between credit risk and Market Value/Book Value, no significant relationship was observed with interest, capital, currency and liquidity risks. In the third model, while a negative and significant relationship was found between credit and currency risks and Price/Earning ratio, no significant relationship was observed with interest, capital and liquidity risks. Consequently, it has been revealed that in order to increase their firm value, Borsa Istanbul 100 index firms should consider sales and receivable policies, financial decisions, liquidity position and exchange rates.