Analysis of the Factors Determining the Price/Earnings Ratio of Companies in the BIST Manufacturing Sector

Abstract

Purpose – The aim of this research is to determine the factors affecting the price/earnings ratio of companies traded in the BIST 100 manufacturing sector between 2015-2019 and to determine the effects of these factors on the price/earnings ratio. Design/methodology/approach – In order to determine the factors affecting the price /earnings ratio, the financial ratios of 70 manufacturing companies whose financial data can be accessed without interruption for 5 periods were evaluated annually. Random effects model estimated using the method of panel data analysis, in parallel to the literature; the current ratio, leverage ratio, market value/book value ratio and return on equity variables with different variables from the literature; net working capital turnover rate, assest turnover and short-term liabilities/total liabilities ratio variables are included. Findings –According to the results of the panel data analysis, a positive relationship between the price/earnings ratio and the short-term liabilities/total liabilities ratio, the market value/book value ratio and the current ratio; a negative and significant was found between asset turnover and return on equity. . It has been determined that there is no statistically significant relationship between net working capital turnover and leverage ratio and price/earnings ratio. Discussion – In the research, the explanatory power of the price/earnings ratio of the independent variables included in the model was determined as 34.9%. Accordingly, it is thought that examining the effects of business-specific and/or macroeconomic factors will be a contribution.