Borsa Istanbul Sustainability Index Research Articles

Effect of ESG Scores on Firm Performance: Evidence from Borsa Istanbul Sustainability Index

Effect of ESG Scores on Firm Performance: Evidence from Borsa Istanbul Sustainability Index

Modeling the link between environmental, social, and governance disclosures and scores: the case of publicly traded companies in the Borsa Istanbul Sustainability Index

This study constructs a proposed model to investigate the link between environmental, social, and governance (ESG) disclosures and ESG scores for publicly traded companies in the Borsa Istanbul Sustainability (XUSRD) index. In this context, this study considers 66 companies, examining recently structured ESG disclosures for 2022 that were published for the first time as novel data and applying a multilayer perceptron (MLP) artificial neural network algorithm. The relevant results are fourfold. (1) The MLP algorithm has explanatory power (i.e., R2) of 79% in estimating companies’ ESG scores. (2) Common, environment, social, and governance pillars have respective weights of 21.04%, 44.87%, 30.34%, and 3.74% in total ESG scores. (3) The absolute and relative significance of each ESG reporting principle for companies’ ESG scores varies. (4) According to absolute and relative significance, the most effective ESG principle is the common principle, followed by social and environmental principles, whereas governance principles have less significance. Overall, the results demonstrate that applying a linear approach to complete deficient ESG disclosures is inefficient for increasing companies’ ESG scores; instead, companies should focus on the ESG principles that have the highest relative significance. The findings of this study contribute to the literature by defining the most significant ESG principles for stimulating the ESG scores of companies in the XUSRD index.

Determining the financial performance of the firms in the Borsa Istanbul sustainability index: integrating multi criteria decision making methods with simulation

Regardless of the industry in which a company operates, evaluating corporate performance is one of the most critical and vital processes; the most essential and prominent performance evaluation is related to financial performance. Appropriate performance analysis is complex and critical for decision-makers in different financial performance factors; thus, a methodological framework is needed to solve such complex decision problems. Therefore, this research aims to rank the companies included in the sustainability index (excluding banks) in Turkey by considering their financial performance. The criteria weights were determined using the full consistency method (FUCOM) by considering the evaluations of four experts. The firms were ranked using nine multi-criteria decision-making methods. The consensus among the nine rankings was ensured with the Copeland technique. The decision matrix includes financial ratios and the stock market performance of the firms; 100,000 FUCOM weights were created with random evaluations to validate the results. The results indicate that the most crucial criterion is the current ratio by considering expert evaluations. Weight simulation indicates that alternative 16 (alternative 21) is superior (inferior) to the other alternatives, even though the weights are determined with random evaluations. Ranking with expert evaluations is similar to the mean of the weight simulation results. The results demonstrate that the proposed framework can be performed as a basis for financial performance ranking.

Evaluation of the Corporate Sustainability Performance of Manufacturing Companies in the BIST Sustainability Index with Multi-Criteria Decision Making Methods

This study aims to evaluate the corporate sustainability performance of manufacturing companies listed in the Borsa Istanbul (BIST) Sustainability Index using multi-criteria decision-making (MCDM) methods. For this purpose, by examining the literature, 11 criteria, including economic, social, and environmental, were determined and the criteria were weighted with method based on the removal effects of criteria (MEREC), one of the objective MCDM methods. According to the weights obtained through the MEREC method, the most important criteria were "return on equity", "operating profitability", and "asset profitability", while the least important criteria were "employee turnover rate", "training hours per employee" and "proportion of female employees". Subsequently, using the weights derived from the MEREC method, the companies were ranked using the CoCoSo (Combined Compromise Solution) method. According to the rankings, the companies demonstrating the highest corporate sustainability performance are Türk Traktor, Ford, Tofaş, and Otokar, while the companies with the lowest corporate sustainability performance are Kerevitaş, Coca-Cola, Petkim, and Tüpraş, respectively. Sensitivity analysis is carried out to test the consistency of the results obtained. Although these results contribute to the literature, in subsequent studies, MEREC and CoCoSo methods can be used to measure different performance criteria of companies. The fact remains that corporate sustainability performances of companies can be measured by using combinations of different MCDM methods.

An Integrated Fuzzy MCDM and Trend Analysis Approach for Financial Performance Evaluation of Energy Companies in Borsa Istanbul Sustainability Index

Financial performance evaluation is a great importance for companies. The aim of this study is to analyze the financial performances of energy companies traded in the Borsa Istanbul Sustainability Index in Turkey comparatively using trend analysis and multi-criteria decision making (MCDM). For this purpose, the changing values of accounting-based performance indicators over the years have been compiled from financial reports. The data were first evaluated by it was analyzed by Hesitant Fuzzy Technique for Order Preference by Similarity to Ideal Solution (HFTOPSIS). Then, it was analyzed by trend analysis for each variable separately. Comparative results show that MCDM rankings based on fuzzy set theory are different from analyzes performed alone. In addition, there is no study in the literature examining the financial performance of energy companies in Turkey based on the sustainability index.

Clustering of firms based on environmental, social, and governance ratings: Evidence from BIST sustainability index

In this paper, companies listed on the Borsa Istanbul (BIST) Sustainability Index are analyzed by performing a cluster analysis based on their environmental, social, and governance (ESG) scores. The results prove that firms with higher ESG ratings do not necessarily perform well in all ESG aspects. The outcomes of the cluster analysis reveal that firms with higher environmental and social scores are the cluster with the most prominent firms in terms of size but with low profitability. However, the group that scored poorly in environmental and social practices but the highest governance pillar was the highest performing in terms of the return on assets. This paper highlights the significance of forming clusters and linking sustainability practices with performance characteristics.

STATISTICAL EVALUATION OF EXCHANGE PERFORMANCE OF BANKS TRADED IN THE SUSTAINABILITY INDEX

Good financial values are not sufficient alone for the survival of today’s businesses, which sustain their existence in the global competitive environment. For businesses to continue their activities, the expression of sustainability has come to the forefront, and therefore, the concept of corporate sustainability emerged from social, economic, and environmental obligations. The Sustainability Index is calculated under the umbrella of Borsa Istanbul to ensure that businesses implement their sustainability strategies on economic, environmental, and social issues and inform investors. The purpose of the study was to investigate whether the stock market performance indicators of the six banks which have the right to be traded in the framework of the BIST Sustainability Index for 2013, when they were not included in the index, and for 2020, when they were included, by using the Paired t-test. As a result of the analyses made for this purpose, significant differences were detected for the price/earnings ratio, market value/book value, transaction volume, and cash flow rate variables aside from share price. It was interesting that only the transaction volume increased for banks after they were included in the index. Borsa Istanbul Sustainability Index is considered a new index, and it is considered that the effect of banks on stock values and other performance indicators will turn positive as the index deepens.

The Link Between Sustainability Reporting and the Core Characteristics of Sustainable Human Resource Management

Abstract Background The concept of sustainable human resource management is becoming a core subject of sustainability reports. Current discussions in the literature focus on how to integrate human resource management (HRM) with sustainability issues and emphasise the concept of “sustainable human resource management” rather than “sustainability and human resource management.” This focus requires a more comprehensive company perspective through the lens of company goals, people, processes and the strategic orientation dimensions of an HRM–sustainability relationship. Within this perspective, new approaches are needed to concentrate on sustainable HRM issues. Research aims The aim of this study is to analyse the contents of the sustainability reports in terms of sustainable HR characteristics and HR orientation dimensions. The content analysis design is based on an integrated approach of the classification of sustainable HR characteristics through HR orientation dimensions. The sustainability reports of seven financial institutions from the Borsa Istanbul Sustainability Index (BIST) are analysed for the year 2019 in order to determine to which degree sustainable HR is actively involved in the sustainability reports. Methodology In this study, an in-depth content analysis is performed on corporate sustainability reports of selected companies in order to form the link between HR orientation and sustainability. This content analysis stands on the integration of two different approaches drawn from the literature (Ehnert, 2014; Ulrich, 1997). Findings The results revealed that there are significant differences between the people-oriented scores and process-oriented scores in private banks, while the scores are more balanced in public banks. Additionally, findings support the shift in the public sector from the traditional bureaucratic model to a new management approach that transfers private sector management techniques to the public sector.

SÜRDÜRÜLEBİLİRLİK ENDEKSİNDEKİ FİRMALARIN KURUMSAL SOSYAL PERFORMANS SKORLARI

This study examined the link between the membership of the Borsa Istanbul Sustainability Index (BIST SI) and corporate social performance proxied by the overall environmental, social, and governance (ESG) scores. Based on this purpose, panel data methods were used to analyze the data of the listed firms in Borsa Istanbul for the years between 2014 – 2018. The main results suggest that compared to their counterparts, the firms included in the BIST SI have higher performance in ESG issues even when controlling for the firm size, financial risk, profitability, and capital expenditures.

Antecedents of corporate sustainability performance in Turkey: The effects of ownership structure and board attributes on non-financial companies

The discourse of corporate sustainability performance (CSP) has created an increasing motivation for companies to improve their competitive advantage. This study examines the drivers leading to a high level of CSP within non-financial Turkish companies listed in the Borsa Istanbul Sustainability Index. Drawing on both stakeholder and agency theories, we formulate a set of hypotheses that link CSP with ownership structure, board diversity, and firm-specific characteristics. Based on logit and probit models, the empirical results tend to confirm the positive influence of foreign and institutional ownerships in shaping CSP and indicate that CSP is positively linked with board size and the proportion of independent board members. Further, the findings show that companies with a leading level of CSP have a lower return than companies with mediocre CSP based on a market-based measure, Tobin’s Q.

Analysis of Sustainability Activities of Companies Continually in The Borsa Istanbul Sustainability Index

Bu araştırmanın amacı Küresel Raporlama Girişimi ilkeleri çerçevesinde Borsa İstanbul (BIST) Sürdürülebilirlik Endeksinde sürekli olarak yer alan şirketlerin sürdürülebilirlik faaliyetleri ile bu faaliyetleri raporlama düzeylerini analiz etmek ve söz konusu şirketlerinin eksikliklerinin veya varsa üstün taraflarının neler olduğunu saptamaktır. Bu amaçla BIST Sürdürülebilirlik Endeksi’nde 2014 yılından bu yana her yıl yer alan 7 şirketin kurumsal web siteleri ile 2018 yılına ait faaliyet raporları, Küresel Raporlama Girişimi ilkeleri olan ekonomik, çevresel ve sosyal faktörler çerçevesinde içerik analizi ile incelenmiştir. Analiz sonucunda BIST Sürdürülebilirlik Endeksi’nde yer alan şirketlerin ekonomik, çevresel ve sosyal bağlamda duyarlı oldukları, gerçekleştirdikleri faaliyetleri ve duyarlılıklarını belgeler, sertifikalar, politikalar ile destekledikleri ortaya konmuştur. Buna karşın şirketlerin sürdürülebilirlik faaliyetleri ve bu faaliyetlerin raporlanması bağlamında hem bütünsel hem de ekonomik performanslarının kurumsal web siteleri ve faaliyet raporları açısından ayrıştığı ve paylaşılan bilgi düzeylerinin farklılık gösterdiği saptanmıştır. Ayrıca şirketlerin kurumsal web siteleri ile faaliyet raporlarında çevresel bağlamda en az yer verdikleri unsurların biyolojik çeşitlilik ve çevresel şikâyet mekanizması olduğu gözlemlenmiştir. Sosyal bağlamda ise şirketlerin kurumsal web siteleri ile faaliyet raporlarında en az verdikleri unsurların toplumsal bağlamda şikâyet mekanizması ile yerli halkın hakları olduğu saptanmıştır.

Exploring the Impact of Sustainability on Corporate Financial Performance Using Discriminant Analysis

The impact of sustainability on corporate financial performance has been an important subject of both academic and professional debate since the 1990s. However, there is a lack of consensus in the literature, and studies from developing countries remain scarce. Accordingly, this study uses discriminant analysis to shed light on the variables that discriminate between sustainable and non-sustainable companies using the companies included in Borsa Istanbul (BIST100) (Istanbul Stock Exchange) and the Borsa Istanbul Sustainability Index for a three-year period. Financial and market variables are used in the analysis. Financial variables include the return on equity (ROE), return on assets (ROA), leverage ratios, and company size. The analysis also incorporates market variables such as alpha, beta, volatility, earnings per share, and the price to book ratio. The results show that the relationship between sustainability and performance is significantly influenced by the company size, leverage, volatility, and price to book ratio. The large companies are considered to be more sustainable as their commitment is well recognized. In this way, they attract more investors. Therefore, their stock prices are less volatile and achieve a better price to book ratio. They obtain easy access to external financing compared to companies considered to be non-sustainable. Moreover, they are less volatile in the market and better valued by investors.

Co-movement dynamics of sustainability indices: investigating the diversification opportunities through FTSE4Good index family and Borsa Istanbul sustainability index

PurposeThis study aims to investigate the international portfolio diversification opportunities provided by Turkish sustainable firms to international socially responsible investors.Design/methodology/approachThe Borsa Istanbul Sustainability Index (XUSRD) and FTSE4Good index family daily data for the period of 11/04/2014-12/31/2017 is used and the DCC-GARCH model is applied to explore the dynamic correlation linkages.FindingsThe results indicate that co-movements between XUSRD and FTSE4Good indices are time-varying and generally display a low level. While the highest average conditional correlation value was observed between XUSRD and Developed 100 index, the lowest one was between XUSRD and FTSE4Good Japan index.Research limitations/implicationsSince XUSRD was launched on 11/04/2014, there is no available data before this date. Additionally, because the study includes indices from the USA to Japan, it is not possible to use high-frequency stock index data due to lack of overlapping time series.Practical implicationsThis study contributes implications for investors of sustainability assets to improve their diversification. Especially, it is identified that the diversification opportunities provided by Turkish sustainable firms are largely possible for Japanese and Australian socially responsible investors. Additionally, this research has contributions for policymakers.Originality/valueAlthough the conventional stock market indices are widely examined in terms of their time-variant relationship, there are only a few studies in the literature focusing on sustainability indices. Socially responsible investments (SRI) are emerging as a new trend, and these investments are also in need of international portfolio diversification. Therefore, this study is expected to fill a gap in the SRI literature.

Impression Management in Graphical Representation of Economic, Social, and Environmental Issues: An Empirical Study

Due to the increasing sustainability concerns among society and investors, companies share information demonstrating their social and environmental impacts to make an impression in corporate reports. Thus, impression management is used to influence company stakeholders’ perception of their performance through graphs. Graphs presented in corporate reports are powerful impression management tools which communicate performance-related messages to the stakeholders. The purpose of this study is to examine the use of graphs to apply various impression management tactics in economic, social, and environmental disclosures of corporate reports. In this research, the use of graphs as an impression management tool has been determined through the corporate reports of 49 companies selected in the BIST (Borsa Istanbul) Sustainability Index of 2018 and 2019, Turkey. In total, 502 graphs in the reports of the selected companies were examined by descriptive analysis and the findings were statistically tested. According to the results, it was found that companies use both presentational enhancement and obfuscation as impression management tactics in corporate reports. This study helps to fill the research gap in the absence of an empirical study conducted in an emerging economy, Turkey. Additionally, it is the first study that focuses on graphs with impression management tactics that has ever been conducted in Turkey.

Sustainability Indices in the Financial Markets, Performance and Intraday Volatility Analysis: The Case of Turkey

Purpose – In the financial markets, especially the institutional investors' interest in funds and portfolios composed of sustainable companies accelerated the formation of sustainability indices. In this context, this study aims to examine the sustainability indices in financial markets and compare the performance of Borsa Istanbul Sustainability Index (XUSRD) with benchmark indices. In this study, unlike other studies in the literature, not only return performance and risk, but also intraday volatility were analyzed. Design/methodology/approach – The research period is between November 4, 2014 and October 31, 2018. The performance of the XUSRD was compared with market indices (XU100, XUTUM and XTUMY) and the Corporate Governance Index (XKURY). Average daily return of indices were used for return performance. Risk factor was analyzed on models established according to CAPM. Intraday volatility was calculated following to the method proposed by Parkinson (1980) and adapted by Corrado and Truong (2007). Findings – Research findings show that average daily return of XUSRD index is not different from market indices and XKURY index. However, when intraday volatility is examined, it was found that XUSRD was more volatile than the market indices XUTUM and XTUMY. In the three regression models established according to CAPM, Jensen α values were not significant, however, β values of XUSRD were found to be higher than 1 and statistically significant. Discussion – Borsa Istanbul Sustainability Index does not provide an advantage to investors in terms of return, risk and volatility. The results can be interpreted that the concept of socially responsible investment is not adequately settled in Turkey.

Borsa İstanbul Sürdürülebilirlik Endeksi İşletmelerinin Sera Gazı Beyanlarına Yönelik Güvence Denetimleri: ISAE 3410 Güvence Denetim Standardına İlişkin Bir Araştırma

Kurumsal raporlarda (finansal ve finansal olmayan raporlar) sunulan bir bilginin doğruluğunun bağımsız bir kuruluş tarafından incelenmesi ve güvencesinin verilmesi, bu bilginin karar almada kullanılabilirliğini ve güvenini arttıracaktır. Sunulan finansal bilgiler için uluslararası düzeyde kabul gören standartlaşmış bağımsız denetim hizmetleri mevcuttur. Son yıllarda finansal olmayan bilgiler için de güvence hizmeti sağlayabilecek standartlar hazırlanmaya başlanmıştır. Bu standartların en bilinenleri Uluslararası Bağımsız Denetim ve Güvence Denetimi Standartları Kurulu (IAASB) tarafından hazırlanan standartlardır. Kurul tarafından hazırlanan spesifik standartlardan biri de ISAE 3410 “Sera Gazı Beyanlarına İlişkin Güvence Denetim Standardı”dır. Bu çalışmada güvence denetimi standartları kapsamında bulunan sera gazı beyanlarına ilişkin güvence standardı (ISAE 3410) açıklanmış ve Borsa İstanbul Sürdürülebilirlik endeksinde yer alan işletmelerin sundukları finansal olmayan raporlarda ISAE 3410 sera gazı güvence standardına ilişkin açıklamaları ölçülmüştür. Ölçüm yapılırken elde edilen finansal olmayan raporlardan (sürdürülebilirlik raporları ve entegre raporlar) içerik analizi yöntemiyle ilgili bilgiler toplanmış ve frekans dağılımı ile çözümlenmiştir. Araştırmanın sonucu genel olarak değerlendirildiğinde; işletmelerin sera gazı beyanlarına ilişkin açıklamalarının yüksek olduğu ve işletmelerin ISAE 3410 sera gazı güvence standardına ilişkin farkındalıklarının olduğu görülmüştür.

Membership of sustainability index in an emerging market: Implications for sustainability

This research investigates the linkage between corporate sustainability performance and corporate financial performance in an emerging market. Moreover, this study examines whether the firm size and profitability affect this relationship. The level of corporate sustainability performance is proxied by listing in Borsa Istanbul Sustainability Index, and corporate financial performance is proxied by share prices. Empirical analyses of the data belonging to the listed firms in Borsa Istanbul for the period of Q1 2014 – Q3 2018 indicate a negative relationship between low level of corporate sustainability performance and corporate financial performance. Additionally, results suggest that this relationship does not change based on the company size and profitability. This paper sheds light on investors’ commitment to companies listed in a sustainability index which are expected to have high level of sustainability performance. The findings of this study provide evidence that membership in a sustainability index is significant for investors in an emerging market. Policymakers may use this finding as a supporting argument for their efforts to increase the awareness of both companies and investors on sustainability issues via sustainability indices.

BİST Sürdürülebilirlik Endeksinde Yer Alan Şirketlerin Kurumsal Sosyal Sorumluluk Faaliyetleri Üzerine Bir İçerik Analizi

Businesses interact with different stakeholders and stakeholders groups in the environment in which they work. Each of these stakeholder groups has a number of expectations from businesses. In this context, it can be seen that corporate social responsibility activities contribute positively to the common expectations and satisfaction levels of the stakeholders. Corporate social responsibility strategies and practices of businesses have the potential to provide competitive advantage. Borsa Istanbul (BIST) Sustainability Index measures the level of giving importance to sustainable policies for the solution of social and environmental problems. From this point it is important that social responsibility activities of the organizations included in the BIST Sustainability Index. The purpose of this study conducting content analysis for corporate social responsibility activities of businesses in BIST Sustainability Index. Corporate social responsibility activities of companies with high level of corporate sustainability performance are considered as a guide. Therefore, the content of corporate social responsibility activities of companies and to see how the differences develop is important in terms of sectoral differences. In the result of the study, it was found that the CSR activities tendency of the companies in the Sustainability Index differed in terms of enterprise and sector groups.

A Comparative Analysis Of Socially Responsible Investing For Borsa Istanbul Stock Market

The purpose of this study is to examine the stock market performance and accounting performance of Participation 30 Index (KATLM), Corporate Governance Index (XKURY) and Sustainability Index (XUSRD), all of which are calculated by Borsa Istanbul (BIST) stock market. The companies in these indexes are approved as companies making socially-responsible investments. Design/methodology/approach – The risk-adjusted performance measures, Sharpe Ratio, Treynor Measure, Jensen Measure, Information Ratio, M 2 Performance Measure and T 2 Performance Measure were used in this article to calculate the stock market performance. The return on assets (ROA) and return on equity (ROE) were used as accounting based performance measures. The results show that there is a positive relation between social responsibility and financial performance for companies in BIST. Research limitations/implications - BIST Sustainability Index has started to be computed as of November 2014, and it is one of the limitations of this study. Practical implications – First, t he shortage of investment alternatives of companies covered within the context ethical finance is not a disadvantage for them. Second, Islamic Finance, which can be investigated within the context of ethical finance, has become popular in recent years in Turkey. KATLM Index, which is consisted of stocks of the companies operating compatible with the principles of participation banking, is an alternative for risk averse investors. Originality/value - Turkish stock market is an emerging financial market. The findings of this study has implications for local and international investors for designing trading strategies, drawing investment decisions and risk management.

The Performance Characteristic of Borsa Istanbul Sustainability Index

In this study, the performance of Borsa Istanbul Sustainability Index is compared with the benchmark index (BIST 100 index) and the period between November 4, 2014 and December 30, 2016 is investigated. In the perspective of risk-adjusted return analysis, the Sharpe ratio for Sustainability Index is higher than BIST 100 index. Also, Jensen alpha is positive although near zero and statistically not significant. Hence, the performance of Sustainability Index is not systematically different from BIST 100 index. Beta value is above 1 and statistically significant, which means that the risk of Sustainability Index is significantly higher than BIST 100 index. According to the results for the joint hypothesis in the context of risk and return, the financial output of Sustainability Index is significantly different from BIST 100 index. EGARCH (1,1) estimation results for the conditional volatility modelling of indices demonstrate that for both indices the volatility persistence is high and negative shocks have greater influence on the volatility than positive shocks. These results indicate that leaving aside the investors’s personal values, there is no financial incentives for investors in terms of financial output of Sustainability Index. However, the response of the investors can differentiate in time considering that the Sustainability Index is created recently, the socially responsible investment approach is relatively new and the awareness regarding the subject can be increased.