ISE review

Istanbul Stock Exchange

Volume: 6 No: 22 April/May/June 2002

Subjects

· Cash Conversion Cycle, Cash Management and Profitability: An Empirical Study on the ISE Traded Companies

· Measurement of Foreign Exchange Exposure on the Turkish Private Banks’ Stock Prices

· Income Velocity of Money (M2): The Case of Turkey, 1986-2000

· Global Capital Markets

· ISE Market Indicators

· Book Reviews

· ISE Publication List

Cash Conversion Cycle, Cash Management and Profitability: An Empirical Study on the ISE Traded Companies

Tülay Yücel & Gülüzar Kurt

Abstract

This paper investigates the relationship of cash conversion cycle, a tool in working capital management, with profitability, liquidity and debt structure. The data covering the period of 1995-2000, of 167 firms whose stocks are listed on the Istanbul Stock Exchange (ISE). The cash conversion cycle, profitability, liquidity and debt structure were examined comparatively in this study on the basis of period, industry and firm size. It was examined that the relationships of these variables and the impact of the cash conversion cycle, liquidity and debt structure on the profitability of the company. The findings of our study suggest that cash conversion cycle is positively related to liquidity ratios and negatively related to return on asset and return on equity. High leverage ratio affects adversely the liquidity and profitability of the company. There is no statistically significant relationship between the cash conversion cycle and the leverage ratio. There is no significant difference in the cash conversion cycle on the basis of period, but it differs on the basis of sector and firm size.

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Measurement of Foreign Exchange Exposure on the Turkish Private Banks’ Stock Prices

Yıldırım B. Önal & Murat Doğanlar & Serpil Canbaş

Abstract

All performance criteria of the banks are affected by the exchange rate fluctuations through foreign currency transactions and operations. However, exchange rate fluctuations -even without such activities can influence the banks through their affect on foreign competition, foreign loan demand and other banking conditions. Exchange rate exposure is classified as operation, transaction, and accounting exposures. Most of the studies, which measure these exposures, focused on the affect of the exchange rate exposure on the value and stock price of the firm. High inflation rates, a highly volatile foreign exchange market, increasing tendency of the banking system to work with exchange rate exposure and the absence of sufficient instruments to cover the exchange rate risk can explain the importance of the foreign exchange exposure in Turkey. Turkish banking system that is the biggest actor in the financial system operates with exchange rate exposure and therefore it is important to analyze the effect of the exchange rate risk on the Turkish banking system. For this purpose, a cointegration model has been estimated to analyze the effect of unanticipated changes in the exchange rate on the stock prices of the 11 commercial banks, which were quoted in the Istanbul Stock Exchange Market.

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Income Velocity of Money (M2): The Case of Turkey, 1986-2000

Fikret Dülger & Mehmet Fatih Cin

Abstract

The aim of this study is to test the long-run relation among income velocity of money (M2) as dependent variable and real income, interest rate and real exchange rate as independent variables, for Turkey between 1986.1-2000.4. Johansen Co-Integration and Error-Correction Methods are employed and a long-run relation among these variables is determined through the Johansen Co-integration method where the parameters obtained are consistent with theoretical expectations. Error Correction Method, however, reveals a fairly low adjustment speed (0.05) of short-run shock to long-run equilibrium.