Abstract:

This study has studied the financial performance impact of reputation risk in public banks registered in BIST. For this reason, operational losses announced between 2007 and 2017 were investigated by the event study method where the banks impacted the stock price. For this purpose, for the 15 loss announcement made during the period in question, the over-normal returns of the shares were analyzed on the event day, in the event window of 3 days and in the event window of 21 days. The analysis resulted in the day when the loss announced (the date of the incident) negative over-normal returns were detected and the effect of the incident was reduced and disappeared as it was moved in both directions from the date of the incident. This also indicates that the information is rapidly spread in the market and that there is an effective market. A regression analysis was also conducted between the operational loss amount and the surnormal return variables and a negative relationship between the two variables was detected. This relationship is not statistically meaningful and is due to a small number of observations. As a result, both analyses have found that reputation risk has a negative impact on the stock prices of public banks.