Research on internal factors affecting the financial performance of companies: an application on the MSCI Türkiye Index

The objective of this study is to identify the factors influencing the financial performance of firms listed in the MSCI Turkey Index. Quarterly data covering the period from 2010 Q1 to 2024 Q3 were collected for 68 firms included in the index, resulting in 59 observations. However, only 35 firms with complete data for the study period were included in the analysis. In the study, three financial performance indicators were employed as dependent variables: The Market-to-Book Ratio (M/B) as a proxy for firm value, and Return on Assets (ROA) and Return on Equity (ROE) as proxies for firm profitability. The independent variables were identified as Financial Leverage Ratio (FLR), Current Ratio (CR), Accounts Receivable Turnover (ART), Inventory Turnover (IT), Asset Size (AS), and Equity Size (ES). For the purpose of testing long-run relationships, the Westerlund (2007) Cointegration Test was applied. Coefficient estimations were conducted using the Mean Group Estimator (MGE) and the Driscoll-Kraay Robust Coefficient Estimator. The results reveal the existence of cointegrated relationships among the variables in the long run. Moreover, ART, FLR, and IT were found to have significant effects on M/B. FLR, CR, IT, AS, and ES were found to have significant effects on ROA. CR, ART, AS, and ES were found to have significant effects on ROE. Through these methods, the statistical significance levels of the variables affecting firms' financial performance were identified. Based on the findings, the study aims to provide guiding insights for investors, financial analysts, and decision-makers KEYWORDS: Financial Performance, MSCI Turkey Index, Cointegration Test, Coefficient Estimators