Relationship between foreign shareownership ratio and profitability ratio: Borsa Istanbul example

The concept of foreign ownership covers any foreign private investment in a foreign country that gives control and ownership over a resource. Ownership here includes technology, capital, management and financial expertise, etc. In general, foreign ownership is considered to have a positive impact on firm performance, especially in underdeveloped and developing economies. Foreign ownership refers to the proportion of foreign investors in the ownership structure of the firm. It is stated that the relationship between foreign ownership and firm financial performance is positive. The examination of this situation within BIST firms constitutes the subject of this study. The study aims to examine the relationship between foreign ownership and return on assets (ROA), return on equity (ROE) and return on operations (FAVOK) of 15 firms operating in BIST sub-sectors. For this purpose, data for the period 2016-2022 are analyzed using panel data analysis techniques. In the study, horizontal cross-section dependence and homogeneity tests were conducted. Accordingly, the stationarity of the series is analyzed with Levin, Lin and Chu, Im, Pesaran and Shin, ADF-Fisher and PP-Fisher unit root tests. Then, the relationship between the variables is analyzed with the panel ARDL technique. According to the findings, there is a positive and significant relationship between foreign ownership and return on assets (ROA) and return on equity (ROE). However, there is no significant relationship between foreign ownership and operational profitability (FAVOK). Keywords: Foreign Ownership, ROA, ROE, FAVOK, Panel ARDL