The impact of consolidated financial statements on firm performance: a research on turkish companies

Theoretical arguments suggest that consolidated financial statements have an impact on the performance of companies and some research findings in various countries tend to support these arguments. The researches indicating the impact of consolidated financial statements on firm performance, however, were mostly undertaken developed countries, such as EU member states, and the validity of such argument for the developing countries like Turkey. This study, which intends to contribute the above arguments on the literature by focusing on Turkish case, aims to investigate the impact of consolidated financial statements on firm performance. This study, using stock price and returns as proxies for performance and equity, net income and total assets as proxy for financial statement information, analysed the impact of transition from individual (solo) to consolidated financial reporting on firm performance, based on data gathered from 384 firm/years financial statement of the firms listed on the BIST, covering the eight year (four years pre-consolidation and four years post-consolidation) period. The relationship between proxies used for performance and financial statement information of companies were tested using the Ohlson (1995) valuation model and by running pooled regression analysis. The results show that the financial information obtained from the consolidated financial statements (i.e. equity, net income and total assets) of companies has an impact on their stock price and returns (i.e. proxies used for performance). Keywords: Consolidated financial statements, firm performance.