Journal of Business & Economic Policy

The Role of Country Risk on Estimating of Share Earnings: An Application on Commercial Banks Registered to Istanbul Stock Exchange (BIST)
Hüseyin Enes ERKOÇAK, Alper Veli ÇAM

Abstract
The estimation of share values and earnings is of extreme importance for investors. For this reason, it is necessary to appropriately determine and identify the factors which may affect share earnings. These factors may also be at the micro level, as well as macro level. The main purpose of this study is to examine the effect of country risk on return on equity of 12 commercial banks that are active in banking sector and publicly-traded in Istanbul Stock Exchange (BIST). The study covers an 11-years period between 2003 and 2013. In the same period, a quarterly financial data of the banks selected and the country risk premium obtained from the International Country Risk Guide (ICRG) were tested using panel data analysis. The empirical results reveal that country risk, financial risk and political risk adversely affect return on equity.

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