Analysis of idiosyncratic risks of listed companies in the V4 countries in 2010–2020

Type of the article: Research ArticleThe paper aims to examine and thereby understand the development of idiosyncratic risks using financial ratios. To achieve this, the study would like to explain the company-specific risks defined in the classic equilibrium model using indicators derived from a company’s balance sheet and profit and loss statements. The objects of this empirical research are the listed companies of the Visegrád countries. Data were sourced from the Orbis database. The total number of companies included in the analysis was 35, as only these had complete data available for the years examined. Multivariate regression analysis and panel analysis (fixed and random effects) were used in the evaluation. According to the results, the market risk of equities is influenced by all the assessed solvency ratios (debt-to-capital ratio, stability ratio, debt-to-sales revenue, and net indebtedness) examined. The degree of market risk of companies is also influenced by the EBIT-to-sales ratio (profitability ratio). The results of the fixed-effect model showed that solvency ratios such as debt-to-capital ratio, stability ratio, and debt-to-sales revenue, and profitability ratios (ROS and ROE) affect the degree of idiosyncratic risks.Acknowledgment The researchers would like to express their gratitude to the J. Selye University for the support.