Determinants of Beta: Analysis of the Relationship between Accounting Based Risk and Market Based (Systematic Risk): A Case of Pakistan

Abstract

Contemporary study examines the systematic risk and its impact on company transaction. Beta is a measure of systematic risk of an organization. Organization value is changes as a result of market risk changes, in which corporation’s transaction occurs. It is important to identify the degree of transaction exposure. Studies shows financial variable are essential to minimize the risk for organization. This paper is exploring the effect of organization due to systematic risk by using CAPM model that is market risk and risk free. Sample data is collected from118 Pakistani non-financial listed on Karachi stock exchange form the period 2004-2010. Empirical finding depict significant positive impact of profitability, operating leverage and size of firm on accounting risk of organization.