Effects of Changes in Financial Ratios of Companies on the Performance of Stock Prices in the Exchange Market: The Automotive Sector

Abstract

By examining the relationship between financial ratios of companies and stock prices, this study investigates whether changes in the financial ratios of companies affect stock prices. Twelve financial ratios were used as independent variables and stock price was used as the dependent variable. The study was conducted via panel data analysis method with data from seven automotive companies traded in Borsa İstanbul (BIST) and six automotive companies traded in stock markets of Germany, the USA, and Sweden for the period of 2007Q1-2018Q4. For automotive companies traded in BIST, stock price is affected by liquidity ratios, financial structure ratios, and activity ratios but there is no statistically significant relationship between stock price and profitability ratios. On the other hand, for the automotive companies traded in stock exchanges in other countries, stock price is seen to be affected by liquidity ratios, financial structure ratios, activity ratios, and profitability ratios.

Keywords

• finance
• financial ratio
• stock price
• panel data
• automotive sector