The relationship between stock prices and financial failure: The case of manufacturing companies in the Borsa Istanbul-30 index

The financial failure of a company refers to the probability that the company may not meet its financial obligations on time. Financial failure can result in the company's bankruptcy, restructuring, or liquidation. The risk of financial failure is a significant factor that can impact a company's stock price. A company with a high risk of financial failure is perceived as riskier by investors, potentially leading to a decline in its stock price. In this study, the relationship between stock prices and financial failures of companies listed in the Borsa Istanbul-30 manufacturing sector has been examined. The study was conducted on a sample of 11 companies listed in the BIST-30 for the period 2010-2020. According to the findings of the study, there is a long-term relationship between the risk of financial failure and stock prices. This indicates that the interaction between financial failure and stock prices occurs not in the short term but rather over the long term. The findings of the study provide a crucial insight for investors. Typically, investors tend to price balance sheets in the short term. However, according to the study results, the situation of financial failure is not an instantly emerging condition. It exerts an influence on stock prices in the long term. Before investing in stocks of companies with higher financial failure risk, investors should carefully evaluate the financial conditions of these companies.