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

Year 2017, , 40 - 55, 30.09.2017

Serhat Yüksel , İsmail Canöz , Zafer Adalı

https://doi.org/10.25295/fsecon.322659

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

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