The Relationship Between Financial Efficiency Ratios and Stock Prices: An Empirical Investigation on Insurance Companies Listed in Borsa Istanbul

Abstract

It is a common perception that efficiency is an important issue regardless of industry. A sound and highly functional insurance industry serves as a crucial financing channel in an economy. At this aspect, this study aims to examine the relationship between the financial efficiency ratios and stock prices of insurance firms, whose stocks are publicly traded in Borsa Istanbul. The study is performed on quarterly data set. The sample period covers 2005Q1 and 2012Q4. Taking three sets of efficiency ratios, which are namely cost, revenue and profit efficiency, as proxy, we run a regression analysis against stock prices. This study is the first, best to our knowledge, in examining the interaction between Turkish insurance firms' efficiency ratios and their stock prices. Our findings suggest that all of employed models confirm statistically significant relationships between the ratios and stock prices. Among the three ratio groups, profitability ratios emerge as the best fit models. The results carry important implications for insurance firms as well as investors. 2Buradan hareketle bu çalışma, hisseleri Borsa İstanbul' da işlem gören sigorta şirketlerinin hisse senedi fiyatları ile finansal etkinlik oranları arasındaki ilişkiyi incelemeyi amaçlamaktadır. Çalışma çeyrek dönemlik veriler üzerinde yürütülmüştür. Örneklem dönemi 2005Ç1 ve 2012Ç4 arasını içermektedir. Maliyet, gelir ve kârlılık etkinliği olmak üzere üç grup etkinlik oranları ölçü alınarak hisse senedi fiyatlarına karşı bir regresyon analizi gerçekleştirilmiştir. Bilindiği kadarıyla, Türkiye' deki sigorta firmalarının etkinlik oranları ve hisse senedi fiyatları arasındaki ilişkiyi incelemesi itibariyle çalışma literatürde bir ilki temsil etmektedir. Ulaşılan bulgular uygulanan bütün modellerde oranlar ve hisse fiyatları arasında istatistiksel olarak anlamlı ilişkilerin varlığına işaret etmektedir. Söz konusu üç oran grubundan en güçlü modellerin, kârlılık oranları olduğu görülmüştür. Bulgular sigorta şirketlerinin yanı sıra yatırımcılar açısından da önemli sonuçlar içermektedir.

Relationship Between Profitability Ratios and Stock Prices: An Empirical Analysis on Bist-100

“…As a result of the analysis, linear relationship was confirmed between NPM and stock prices in all three models. Akyatan (2016), Kaya and Öztürk (2015), Aktaş and Ünal (2015) and also Parlakkaya and Kahraman (2017) reached the similar results. On the other hand, Sevim (2016) revealed that there is no significant relationship between ROA, ROE ratios and stock returns.…”

“…On the other hand, Sevim (2016) revealed that there is no significant relationship between ROA, ROE ratios and stock returns. In addition, Aktaş and Ünal (2015) did their research by using quarterly data. In this study, 1, 2 and 3 months lagged stock prices after each quarter period was taken into consideration.…”

“…Results of the study indicates that, return on equity, book value per share, dividend per share, dividend yield, price earnings ratio and firm size variables are important determinants of stock prices in Bahrain Stock Exchange. In Aktaş and Ünal (2015)'s research that is related with insurance companies, researchers tried to confirm whether there is a relationship between stock prices and three groups of efficiency ratios including cost, revenue and profit. Sampling period comprises of 2005Q1-2012Q4.…”

Financial ratios and efficiency in Malaysian listed companies

“…Over the last period, number of studies give more consideration to efficiency in companies and its relationship with other financial ratios that measure several variables such as firm size (Halkos and Tzeremes, 2007); leverage (Margaritis and Psillaki, 2007;Popova et al, 2017); asset pricing implications (Callice et al, 2019); corporate governance (Lin et al, 2009); profitability (Santosuosso, 2014;Attefah and Polytechnic, 2016;Sunjoko and Arilyn, 2016;Azad et al, 2018); stock prices (Rafet and Seyfettin, 2015;Aktaş and € Unal, 2015); capital Structure (Margaritis and Psillaki, 2007); operational cash flow (Santosuosso, 2014) and effective decision-making (Theogene et al, 2017). Some studies are targeting different sectors such as manufacturing (Alam and Sickles, 1998;Becchetti and Sierra, 2003), insurance (Tana et al, 2009;Greene and Segal, 2004;Cummins and Xie, 2013), agriculture (Selamat and Nasir, 2013) and banking (Rafet and Seyfettin, 2015;Sufian et al, 2016;Theogene et al, 2017). Practically, financial ratios add valuable information that enhance the capability to assess the financial situation of a firm.…”

Fi̇nansal Performansin Beli̇rlenmesi̇nde Ve Siralanmasinda Topsi̇s Çok Kri̇terli̇ Karar Verme Yöntemi̇ni̇n Kullanilmasi: Bist Si̇gorta Şi̇rketleri̇ Uygulamasi

“…Çalışmada kullanılan finansal oranlar şirketlerin likidite, kaldıraç, karlılık durumlarına ilişkin mali oranlar ile etkinlik oranlarından (maliyet etkinliği, gelir etkinliği ve kar etkinliği) oluşmaktadır. Tablo 1' de yer alan analizde kullanılan finansal oranların seçiminde ise sigorta sektörü için yapılan çalışmalardan faydalanılmıştır (Ajlouni & Tobaishat, 2010;Akel ve diğerleri 2017;Akın & Ece, 2013;Aktaş & Ünal, 2015;Altan, 2010;Bülbül & Köse, 2016;Çiftçi, 2004;Dalkılıç, 2012;S. Diacon, 2001;Kayalı, 2007;McDonald & Morris, 1984).…”