The nexus between financial failure and stock prices: Panel Pedroni, Panel Kao and Panel AR DL Co-Integration Tests in Turkey REIT s

Abstract

In today’s globally competitive environment, companies must keep up with these competitive conditions to be successful. Failure of companies to show the expected financial performance, fulfil their financial obligations, or reach their financial targets is considered a financial failure or bankruptcy risk. Real Estate Investment Companies or Trusts (REICs or REITs) are capital market institutions that qualify as legal entities and are partnerships in a joint-stock company that provides financing to all kinds of real estate or real estate projects and bring together many investors for the desired real estate. REITs are an essential investment choice that continues its rapid development in Turkey. This study aims to examine the relationships between the ZScores calculated by periods of REIT companies traded in Borsa Istanbul between 2010–2019 and the stock price performances. In the study, primarily Altman Z-Score and Springate S-Score values of companies traded in Borsa Istanbul were calculated with the help of financial ratios. Then, Pedroni and Kao panel co-integration analysis and Dumitrescu-Hurlin panel causality analysis were performed. According to the analysis results, there is a long-term relationship between the financial failure scores of REIT companies and their stock prices. However, a causality relationship was found between the series.