The Treynor Ratio as a Risk-adjusted Return of Croatian Listed Firms

Tomislava Pavic Kramaric (), Marko Miletic () and Petar Pepur ()
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Tomislava Pavic Kramaric: University of Split, University Department of Forensic Sciences
Marko Miletic: University of Split, University Department of Professional Studies
Petar Pepur: University of Split, University Department of Professional Studies

International Journal of Economic Sciences, 2023, vol. 12, issue 2, 92-106

Abstract: Motivated by the importance of determinants of firm performance, especially in terms of risk-adjusted performance that considers underlying risks, this paper explores the effects of firm-specific determinants on risk-adjusted returns such as the Treynor ratio. Specifically, the authors explore whether firm size, capital expenditures, capital intensity, equity ratio, leverage, profitability, listing age, and liquidity affect the performance of Croatian non-financial listed companies that form the CROBEXplus equity index in the period 2014 – 2021. Utilizing dynamic panel analysis, several key deterministic factors of risk-adjusted performance are identified including firm size, capital intensity, equity ratio, leverage, profitability, and listing age. In other words, larger firms tend to experience greater risk adjusted returns than their smaller counterparts as well as firms with higher equity ratios, i.e. those not overly indebted. Results also show that capital intensity, which is viewed as a source of entry barrier, is positively related to risk adjusted-performance which is also true for profitability. Furthermore, companies that have a longer presence in the market in terms of being listed on the stock exchange document enhanced risk-adjusted returns. These findings have significant policy and practical implications.

Keywords: the Treynor ratio; risk-adjusted returns; listed firms; Croatia (search for similar items in EconPapers)
JEL-codes: G10 G23 L25 (search for similar items in EconPapers)
Date: 2023
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