Determination of the Variables Affecting the Price Earning Ratios of Deposit Banks in Turkey by Mars Method

Authors : Serhat YÜKSEL, İsmail CANÖZ, Zafer ADALI

Pages : 40-55

Doi:10.25295/fsecon.322659

View : 18 | Download : 13

Publication Date : 2017-09-30

Article Type : Research Paper

Abstract :In this study, it is aimed to identify the factors influencing the price-earnings ratio of deposit banks in Turkey. In this context, quarterly cumulative data of 10 deposit banks traded in Istanbul Stock Exchange for the periods between 2002:4 and 2017:1 is analyzed by using MARS method. According to the analysis results, it is concluded that if the ROE of the banks is higher than 5.92%, it affects price-earning ratio positively. However, this effect will be negative when ROE exceeds 21.12%. This indicates that investors are willing to pay more for the stocks of the banks when their profitability is increasing. Besides, it is also identified that there is an adverse relationship between the market interest rate and NPL of the banks with the price-earnings ratio. In case of any raise in the interest rate and NPL of the banks, investors` expectation of the future profitability of the banks will be negative. As a result, it is understood that the investors are reluctant to pay more amounts to their bank shares. 
Keywords : MARS, Banking, Price Earning Ratio, MARS