International Journal of Business Economics and Management Perspectives

ISSN:2458-8997

THE EFFECT OF REPUTATION RISK ON FINANCIAL PERFORMANCE: AN APPLICATION ON PUBLIC BANKS TRADED IN BIST BANKING SECTOR


In this study, the effect of reputation risk on financial performance of public banks registered in Istanbul Stock Exchange was investigated. For this purpose, it has been investigated whether the effect of the operational loss announcements made between 2007 and 2017 on the stock price of banks by using case study method. For this purpose, for the 15 loss announcements made in the said period, the abnormal returns of the stocks on the event day, 3-day event window and 21-day event window were analyzed. As a result of the analysis, negative abnormal returns were detected on the day of the announcement of the losses (event date) and it was found that the effect of the event decreased and disappeared in both directions. This shows that information is spread rapidly and there is an efficient market.In addition, regression analysis was performed between operational loss amount and abnormal return variables and a negative relationship was found between the two variables. This relationship is’nt statistically significant, and this situation was attributed to the low number of observations. As a result of both analyzes, it has been determined that reputation risk has a negative effect on public banks stock prices.


Keywords


Reputational Risk, Operational Loss, Financial Performance, Case Study

Author : - Şakir SAKARYA, Nevzat ÇALIŞ, Devran DENİZ
Number of pages: 61-74
DOI: http://dx.doi.org/10.29228/ijbemp.40373
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International Journal of Business Economics and Management Perspectives
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