Effect of country risk to share earnings: An application on marchent banks registered to Istanbul Stock Exchange

Nowadays in capital markets, power of globalization, contrubition of foreign capital to economic development becomes more understandable. Countries begin a quest more earnings, for the development of transboundary economic relations and the attracting foreign capital in international area. This contributes to investor in different segments as new offer a business opportunity and increase of imports and exports. But, while investors make profit with transboundary investment, they takes a risk which must be endure and confronted with the risk arising from investments.The aim of this study which is about the effect of country risk to return on equity is tests 12 merchant banks that operand İstanbul Stock Exchange (BIST) and operate banking sector how and what extent effect of country risk to return on equity. Research includes a span of 11 years between 2003 – 2013. In relevant periods utilised quarterly data of banks and country risk premium obtained from International Country Risk Guide (ICRG) are tested by using panel data analysis metod. As a result, country risk economic risk premium politic risk premium from ingredients of country risk and merchant banks registered to BIST 100 index return on equity negative influence located in 11 years session between 2003 – 2013 in Turkey. Keywords: Country Risk, Economic Risk, Political Risk, Financial Risk, Share earnings, Merchant Banks