Financial Performance and Risk Dynamics: Evidence from BVB Listed Companies

Abstract

This study examines the relationship between financial performance and corporate risk among companies listed on the regulated market of the Bucharest Stock Exchange (BVB) between 2019 and 2024. The main objective is to evaluate the influence of bankruptcy risk indicators (Altman Z-score and Conan & Holder model), liquidity ratios (current ratio and quick ratio), financial leverage, and stock returns on financial performance, as measured by return on assets (ROA) and return on equity (ROE). The methodological framework incorporates distribution analysis and correlation analysis using Pearson, Spearman and Kendall coefficients, as well as linear regression models to evaluate the explanatory power of risk and liquidity indicators on financial performance. The results suggest that ROA is more closely linked to fundamental financial conditions than ROE, as it exhibits stronger and more consistent relationships with financial stability and liquidity indicators. In contrast, ROE appears less predictable, reflecting the influence of firm-specific financial policies. Regression analysis reveals moderate explanatory power, with significant relationships emerging only during specific periods, particularly in the post-pandemic context. Furthermore, stock returns demonstrate weak and unstable connections with accounting performance, emphasising the impact of market inefficiencies. Overall, the findings emphasise the dynamic and context-dependent nature of the relationship between performance and risk in an emerging market environment. UDC: [005.332.1:005.334]:005.915; JEL: G32, G33, G30