Turkish Firms Research Articles

The impact of environmental performance on capital structure and firm performance: the case of Turkey

Purpose The purpose of this study is to investigate the effect of environmental performance on the capital structure and financial performance of Turkish listed firms. Design/methodology/approach This study used data of 49 firms listed on Istanbul Stock Exchange during the period between 2014 and 2019, resulting in 205 firm-year observations. The environmental performance data were drawn from the carbon disclosure project Turkey climate change reports. Ordinary least squares and binary logistic regression models were used to examine whether environmental performance impacts the capital structure and financial performance. Findings The findings of this research revealed that environmental performance significantly positively affects the firm leverage. Findings also showed that environmental performance has a significantly positive impact on return on assets, operating profitability and return on equity, but no significant impact on stock returns. Practical implications Given the increased borrowing costs for Turkish firms after the 2018 currency crisis in Turkey, the findings of this study are very important as they enable managers of Turkish firms to make better decisions related to capital structure and to understand the role of environmental performance in reducing the cost of debt and enhancing financial performance. Originality/value To the author’s knowledge, this research is the first to investigate the effect of environmental performance on capital structure in the Turkish context, and is one of few that explained how environmental performance affects the financial performance of Turkish firms.

Oil Prices and Firm Returns in an Emerging Market

This study examines the oil price effect on Turkish stock market as an emerging country on firm level data. After controlling short term interest rate, nominal exchange rate and crude oil price, we find that firms behave differently to a change in oil prices. The findings include these: i) variations in oil prices do not significantly affect Turkish firm returns. Out of 153, only 38 firms are affected significantly by oil price after controlling exchange rate and interest rate; ii) oil prices influence stock returns of Turkish firms, suggesting that under reaction and gradual information diffusion hypotheses may hold. iii) small and middle-sized firms are more affected negatively from oil price changes, where large-sized firms affected more positively. The empirical findings of this study have potential implications and offer significant insights for both practitioners and policy makers.

Effective innovation via better management of firms: The role of leverage in times of crisis

The relationship between innovation activities and firm performance has been well established in the context of major economies. However, in the case of emerging economies, firms are more financially constrained, and they tend to suffer from weaker-management practices, which can be a drag on their performance despite greater innovation. Hence, whether better-managed firms benefit more effectively from innovation with greater access to finance remains unexplored. Using quarterly firm-level data during 1992–2015 from Turkey, this paper aims to uncover whether innovation intensity, in the traditional sense, namely R&D and intangibles, and better managerial practices, in the modern form, contribute to the performance of Turkish firms. By considering the financial constraints before and after the 2008 global financial crisis and by undertaking an impact evaluation of improved accounting regulation relating to disclosure on management practices, we find that all types of innovation activities boost profitability. In addition, R&D activities, with better management quality, help improve firm performance. Furthermore, although higher debt level, in general, is harmful, firms with better management quality make more effective use of innovative activities, along with higher financial leverage, in boosting their performance. Lastly, those better-managed firms in an emerging economy outperformed even during times of financial stress following the global financial crisis. The above findings survive a battery of robustness checks.

Testing BIST for Equity Return Anomalies using ARDL Model

Purpose – This study analyzes the Borsa Istanbul against equity return anomalies. With this purpose, the role of key financial stability indicators on long and short-term volatility movements in Borsa Istanbul has been tested. Design/methodology/approach – The model used in the study attempts to explain the volatility in stock prices using Return on Equity, Equity Ratio, and Net forex position over net income. Zivot Andrews and ARDL bounds tests have been conducted on the series and cointegration relationships between all of the companies are detected. Following this, long term ARDL models and Error correction models have been implemented on each of the series. The data set used in the study covers the period between 2000Q3-2019Q4 at the quarterly frequency. 5 companies are selected out of the BIST100 index with the highest price maturity, excluding the financial institutions. Findings – Results of the study indicate that both Return on Equity and Equity Ratio have statistically significant, inverse relationships with the analyzed companies both long and in short term. However, for the companies used in the study, the net forex position had no significant effect. Discussion – As the majority of the stock price volatilities are affected negatively by the equity return factors, the findings of the study reject the existence of a market-wide equity return anomaly in the Turkish stock market. However, the net forex position is one of the most significant risk factors for the Turkish firms and as findings indicate, it is alarming that it plays no part at all in the investment decisions.

O-Ring Production Networks

We study a production network where quality choices are interconnected across firms. High-quality firms are skill intensive and trade more with other high-quality firms. Using data from Turkish firms, we document strong assortative matching of skills in the production network. A firm-specific export demand shock from a rich country increases the firm's skill intensity and shifts the firm toward skill-intensive domestic partners. We develop a quantitative model with heterogeneous firms, endogenous quality choices, and network formation. An economy-wide export demand shock of 5 percent induces exporters and non-exporters to upgrade quality, raising the average wage by 1.2 percent. This effect is about nine times the effect in a special case of the model with no interconnection of quality choices.

The impact of catering incentives on the dividend policy: evidence from Turkish firms

PurposeThe purpose of this paper is to empirically analyse the propensity to pay dividends and investigate whether the catering theory is valid in an emerging market.Design/methodology/approachThe sample of this study comprises listed firms on the stock market of Turkey, Borsa Istanbul, with 2,438 observations during the period 1999–2015. In line with previous studies in the literature, appropriate control variables are used that may have an impact on Turkish firms' dividend policy. Control variables are examined in the likelihood of paying dividends by using Fama–Macbeth (1973) style cross-sectional logistic regressions. In addition, the linkage between the dividend premium and the propensity to pay is revealed to test the validity of the catering theory.FindingsThe findings of the study confirm the tenets of the catering theory for Turkey. When a positive dividend premium exists, that is when investors demand dividend, firms cater them and distribute dividend; on the contrary, when there is no demand, firms prefer not to pay. The effect of catering incentives on the dividend policy provides useful information for managers because the catering theory claims that investors' demand for dividends has an impact on the valuation of firms.Originality/valueIn the aftermath of the 2001 financial crisis, Turkey implemented far-reaching reforms and policy initiatives to improve the efficiency of capital markets and to overcome the obstacles sourcing from their culture and civil law origin. With the adoption of these major economic and structural reforms, as a civil law origin country, Turkey has managed to ameliorate the protection of investors as in common law countries. Ferris et al. (2009) state that the catering theory is applicable to firms in common law countries but not in civil law countries. In addition, prior research is not so extensive regarding the impact of catering incentives on the dividend policy of firms in emerging markets. The results of the analyses suggest that the catering theory is valid for Turkey as a civil law origin emerging country, and to the best of authors' knowledge, this study is the first to test the catering theory in the Turkish capital markets.

How Management Innovation Affects Product and Process Innovation in Turkey: The Moderating Role of Industry and Firm Size

In the last decade, studies on how firms introduce management innovations to drive product and process innovation have proliferated. It has long been assumed that management innovation enhances product and process innovation by increasing firms' exposure to new knowledge sources and improving their efficiency in the production processes. However, there is still an important conceptual debate and contradictory empirical results about the actual benefits of management innovation and the contextual conditions under which those benefits are likely to transpire. To address this gap, we aim to investigate the benefits of management innovation on product and process innovation in the context of emerging economy firms, in Turkey, and how industry affiliation and firm size influence those benefits. Using responses from 1,065 Turkish firms, we find that the benefits of management innovation on product and process innovation is greater for both service firms and small firms compared to manufacturing firms and large firms. The paper has important theoretical implications to management innovation literature by showing that the benefits of management innovation on product and process innovation show variance depending on different contextual conditions.

What Drives the Liquidity of Industrial Firms?

We investigate the cash management policy of Turkish industrial firms during the period 1998–2018. Our findings indicate the relative stability of cash holdings of industrial firms with a mean of 12.84 per cent of total assets, which is higher compared to other Turkish firms. Overall, cash flow, sales growth, leverage, net working capital and capital expenditures are the main drivers of cash holdings. We examine the effect of one of the indicators of asymmetric information—earnings quality score on the level of cash holdings. The results show that firms with high earnings quality score tend to hold a high level of cash due to operational use. Finally, we conclude that the drivers of cash holdings also differ in firms with high versus low earnings quality score.

Environmental Disclosure: Determinants and Effects on Financial Performance? An Empirical Evidence from Turkey

This article investigates the determinants of environmental disclosure and its effect on financial performance. Using a sample of 66 firms listed on Istanbul Stock Exchange during the period 2014-2018, we find that highly leveraged and larger firms, and firms with higher equity agency costs are more likely to disclose environmental information. However, the results indicated that profitability, industry type, information asymmetry, investment opportunities and business risk do not affect the probability that the firm will disclose environmental information. Finally, we find a weak evidence that environmental disclosure affects the financial performance of Turkish firms.

A new multivariate approach for assessing corporate financial risk using balance sheets

Several indicators and univariate ratios can be used to measure the soundness of firms as reflected in their balance sheets (leverage, profitability, liquidity ratio, etc.). However, each indicator alone cannot measure a firm's overall financial risk or financial distress level. In this study, we measure the financial strength of the real sector firms listed on the Borsa Istanbul (BIST) by producing a composite index score that combines several different corporate finance ratios. In the first section, we conduct a multiple discriminant analysis of the variables used in Altman's z-score (1968), which is the most prevalent composite index used to measure firms' financial risk in the literature. In the second section, we introduce a new index, called the multivariate firm assessment (MFA) score, which uses the ratios that best explain the characteristics of companies listed on the BIST. The Tailored version of the Altman z-score and our new index have predictive power of around 90 percent. Furthermore, the MFA score reflects the impact of macroeconomic developments on firms' balance sheets and thus serves as an early warning of financial distress for Turkish firms. Our analyses using the MFA score suggest that non-exporting firms and firms with an open foreign exchange position have weaker balance sheets.

Foreign firm operations and skills development of local employees in violence-hit countries

This paper addresses the skills development of local employees, following the operations of foreign firms in violence-hit and fragile countries. Despite being high-risk countries, such countries receive the attention of foreign firms, which in many cases offer services that are vital for daily life and improve local productivity. Within the overall conceptual focus of peace engineering, we analyze the operations and activities of six Turkish firms operating in the violence-hit and fragile countries of Congo, Ethiopia, Iraq, Morocco (the Western Sahara region), Somalia, and Sudan. The findings indicate that foreign firms operating in fragile and conflict-affected countries, along with achieving business goals, contribute significantly to the skills development of local employees and establish legitimacy through forging social connections and adopting corporate social responsibility activities. Their support for skills development resulted in career advancement opportunities and, in some cases, entrepreneurial ventures that were initiated by local employees. We argue that, despite precarious and unpredictable conditions, the operations of such firms can provide economic incentives as well as increased well-being and long-term stability in such contexts. Thus, the findings of this study have important implications for post-conflict recovery and local economic development through skills formation and entrepreneurial start-ups.

THE ROLE OF INSTITUTIONAL DISTANCE, BUSINESS GROUP AFFILIATION AND OWNERSHIP LEVEL IN CROSS-BORDER M&As OF TURKISH FIRMS

Institutional environment has become a key phenomenon for internationalization studies of emerging market firms. As the presence of emerging market firms has increased in global economy, the investigation of the impacts of institutional environment on internationalization has become vital. The aim of this study is to examine the impacts of formal and informal institutional environment differences and business group affiliation on the choice of ownership level in cross border merger and acquisitions of Turkish firms. The study has analyzed 280 completed cross border merger and acquisitions of Turkish firms between years 1987-2018. As the formal institutional distance increases, Turkish firms prefer lower level of equity ownership. In contrast, Turkish firms prefer higher level of ownership as the informal institutional distance increases. Moreover, business group affiliation has a mitigating effect only in informal institutional distance and ownership level relationship.

THE GLOBAL FINANCIAL CRISIS AND CAPITAL STRUCTURE DECISIONS OF TURKISH SMEs: A REVIEW

Due to the arising uncertainties with the global financial crisis, capital structure decisions became crucial for Turkish firms, especially small and medium-sized (SMEs) firms. Since SMEs face higher information asymmetry, transaction costs and risk, they face more difficulties in accessing finance during the financial market turmoil. In this review, we comparatively analyze findings from capital structure decisions for Turkish firms. As might be anticipated, we expect that SMEs should take more precautionary steps under the severe crisis conditions compared to listed firms in Borsa Istanbul.

ÇEVRE YÖNETİMİ UYGULAMALARININ ÖRGÜTSEL PERFORMANSLA İLİŞKİSİ ÜZERİNE BİR ARAŞTIRMA: ÇEVRESEL PROAKTİFLİĞİN ARACILIK ETKİSİ

Çevre yönetimi uygulamalarının temel boyutlarının ve öncülerinin araştırılması, artan bir araştırma ilgisini hak etmektedir. Kuramsal açıdan dinamik yetenekler kuramının argümanlarını değerlendiren bu çalışmanın inceleme alanlarından biri çevre yönetimi uygulamalarının çevresel proaktiflik üzerindeki etkisinin değerlendirilmesidir. Buna ek olarak, araştırma, çevre yönetimi uygulamalarının benimsenmesi ile örgütsel performans arasındaki ilişkide çevresel proaktifliğin aracılık rolünü araştırmaktadır. Örneklemini çeşitli sektörlerden 208 Türk firmasının oluşturduğu araştırmanın sonuçları, çevre yönetimi uygulamalarının çevresel proaktifliği olumlu yönde etkilediğini göstermektedir. Çevre yönetimi uygulamalarının örgütsel performans üzerindeki etkisinin çevresel proaktiflik ile anlam ve önem kazandığı görülmektedir. Bununla birlikte çevresel proaktiflik ve örgütsel performans arasında da olumlu bir ilişki olduğu görülmektedir. Başka bir deyişle, çevresel proaktifliğin çevre yönetimi uygulamaları ile örgütsel performans arasındaki ilişkide tam aracılık etkisi gözlemlenmiştir.

An Overview of Cross-Border Acquisitions: A Study on Turkish Companies in the Period 1998-2018

Sınır ötesi gerçekleştirilen şirket satın alma faaliyetleri tüm dünyada olduğu gibi Türk şirketlerinin de ilgisini çekmektedir. Bu çalışmanın amacı ise, hedef ya da alıcı şirketlerden birinin Türk diğerinin yabancı olduğu satın alma faaliyetlerini incelemek ve genel bir çerçeve sunmaktır. Bu çalışmada kullanılan veriler Zephyr isimli veri tabanından elde edilmiştir. 1998-2018 yılları arası yirmi yıllık dönem içerisinde gerçekleştirilen Türklerin yurt dışında yaptığı 275 işlem ile yabancı firmaların Türkiye’de gerçekleştirdiği 883 satın alma işlemi araştırmanın kapsamını oluşturmuştur. Yapılan analizlerin sonucu satın alma işlemlerinin genellikle Avrupalı firmalarla gerçekleştirildiğini göstermiştir. İşlem sayısı ve işlem hacmi yıllar itibariyle değişkenlik göstermektedir. En fazla satın alma faaliyetinin gerçekleştirildiği sektörler finans ve imalat sektörleri olarak dikkat çekmektedir. Genel olarak yatay olmayan satın alma işlemlerinin yatay satın alma işlemlerine göre daha fazla sayıda olduğu görülmüştür.

Development of international market information in emerging economy family SMEs: The role of participative governance

ABSTRACT Emerging economy family SMEs pursuing internationalization have to develop international market information acquisition capability. However, there is limited knowledge about how to develop and utilize this capability. We investigate the role of participative governance and the extent to which participation of board and family members enhances this capability. We also examine the mediating role of this capability in the relationship of participative governance and international firm performance. Our analysis of 192 Turkish firms corroborates the role of participative governance. However, we find that this capability plays a partial mediating role only when family firms measure their performance subjectively but not objectively.

The Impact of Sustainable Supply Chain Management and Supply Chain Collaboration on Turkish Firms Performance: Moderator Effect of Uncertainty

Supply Chain-Related Sustainability Cases offer organizations the challenge of enriching environmental, social, and economic performance within supply networks. Firms are increasingly implementing environmental and social dimensions of sustainability. During the implementation, they check the collaboration efforts for getting information outside of the organizations to develop and improve both firm and supply chain performance. Due to drastic changes in the business environment, firms face uncertainty. This study aims to analyze the impact of sustainable supply chain management and collaboration under the supply chain uncertainty on firms' performance. Based on the literature review the conceptual framework was developed. To test the research hypotheses, multi-item scales and survey questionnaires were adopted from prior research. The research is based on a quantitative approach using a questionnaire survey. We obtained 240 usable questionnaires from 112 companies. The Partial Least Square method was used to test the proposed conceptual model. The results show that sustainable supply chain management is positively associated with supply chain performance and supply chain collaboration. Also, we found that supply chain collaboration has a positive effect on supply chain performance. Supply chain performance is positively associated with firm performance. Furthermore, supply chain uncertainty moderates the relationship between collaboration, sustainable supply chain management, and supply chain performance.

Effect of financial constraints on the growth of family and nonfamily firms in Turkey

This study examined whether family-owned firms have advantages for accessing external financial sources for growth. Especially in developing countries with imperfect markets, firms can face difficulties accessing external financing sources; however, family-owned firms might have some advantages in this regard over nonfamily firms. Unlike previous studies, this study considered that, in the Turkish context, nonfamily firms are financially constrained while family firms are not. To examine this hypothesis, we used the generalized method of moments (GMM) approach to analyze panel data from 2006 to 2017. The findings showed that financing constraints were a significant obstacle to growth for nonfamily-owned manufacturing firms while the effect was not present for family firms since they are controlled by large, well-established family groups. These results elucidate the relationship between corporate ownership and growth among Turkish firms, especially those with strong links to large family-owned corporations. The results also revealed that reputation and network may facilitate easier access to external financing sources, especially when considering the “Big Six” family ties of firms.

Inventory investment and cash flow sensitivity: evidence from Turkish firms

Purpose - This study analyzes the inventory investment – cash flow sensitivity for 166 manufacturing firms in Turkey listed in Borsa Istanbul. The time spans 2006-2018. Methodology - Based on the previous literature, Lovell’s (1961) target adjustment model is used. The baseline equation model is estimated by the system Generalized Method of Moments (GMM). Findings- The relationship between inventory investment and cash flow is statistically positive for constrained firms, while insignificant for unconstrained firms according to all models. The effect of Gross Domestic Product (GDP) on inventory investment is positive and significant for both constrained and unconstrained firms, this implies that GDP contributes to an increase in inventory investment. Conclusion- This study is the first one that analyzes the inventory investment and cash flow relationships for Turkish manufacturing firms and wants to fulfill this gap in the literature. It is found that cash flow is positively significant for constrained firms according to size and age classification criteria.

Ambidextrous Organisations from the Perspective of Employed Knowledge Management Strategies: Evidence from Turkey

Management literature proposes several broad categories of business motives behind Knowledge Management (KM) initiatives: minimising risk, improving efficiency and effectiveness and enabling innovation. While risk minimisation and efficiency and effectiveness improvement are fundamental for organisational survival, innovation is the key for organisational advancement and long-term economic success. Choosing the right KM strategy is of utmost importance for organisational performance. On the one hand, two popular Knowledge Management strategies termed codification and personalisation differ in their reliance on technology or people. On the other hand, two strategies referred to as exploitation and exploration differ in their focus on transferring existing or developing new knowledge. This study aims to examine the main business forces in KM adoption and to identify preferred KM strategies responsively. More specifically, it aims to provide a metric in determining (1) applied and realised KM strategies, (2) business focus, (3) knowledge processes and (4) knowledge focus. Data, collected from 372 surveyed employees of Turkish organisations across different industries, were analysed in terms of the two key classes of KM drivers and strategies. The findings reveal a widespread tendency for simultaneous pursuance of dual survival and advancement business goals and widespread integration of codification and personalisation as well as exploitation and exploration strategies. The findings validate the ability of Turkish firms in the organisation of KM activities through the combination of somewhat contradictory drivers and strategies implying their ambidexterity regarding considered KM strategies.