The Effect of ESG (Environmental, Social And Governance) Scores on Company Performance: Evidence from the Manufacturing Industry in Turkey

Yıl 2024, Sayı: 41, 109 - 117, 26.12.2024

Halil İbrahim Akpınar , Mehmet Sabri Topak

https://doi.org/10.26650/ekoist.2024.41.1540173

Öz

This study aims to investigate the impact of Environmental, Social, and Governance (ESG) scores on company performance in manufacturing companies using panel data analysis. The sample comprises data from sixteen companies listed in BIST Industrial Index (XUSIN) over the period 2018-2022. Two models were established in which ROA and Tobin’s Q ratios, selected as indicators of company performance, were used as dependent variables. In this context, the study investigated the impact of ESG scores on performance measures both in terms of the performance derived from the companies’ intra-period activities and reflected in their financial statements, as well as the stock market performance of their shares. The independent variables included in the models are ESG scores, company size (SIZE), leverage ratio (LEV), current ratio (CR), asset turnover ratio (ATO), interest coverage ratio (ICR), and revenue growth rate (RGR). Based on the findings in the analysis, the final models were estimated by using Driscoll Kraay (1998) standard error method. The study finds that ESG scores have a statistically significant positive impact on both ROA (significant at the 10% level) and Tobin’s Q (significant at the 5% level). This indicates that improvements in ESG performance can enhance both profitability (ROA) and stock market performance (Tobin’s Q) for companies.

Anahtar Kelimeler

Sustainability, ESG, Performance, Panel Data Analysis, Borsa Istanbul

Kaynakça

• Alareeni, B.A. & Hamdan, A. (2020). ESG impact on performance of US S&P 500-listed firms. Corporate Governance, 20(7), 1409-1428. google scholar
• Belsley, D. A., Kuh, E., & Welsch, R. E. (1980). Regression Diagnostics: Identifying Influential Data and Sources of Collinearity. Wiley. google scholar
• Bhargava, A., Franzini, L., & Narendranathan, W. (1982). Serial Correlation and the Fixed Effects Model. The Review of Economic Studies, 49(4), 533-549. google scholar
• Brown M. B. & Forstyle A. B. (1974) The Small Sample Behavior of Some Statistics Which Test the Equality of Several Means. Technometrics, 16 129-132. google scholar
• Carnini Pulino, S., Ciaburri, M., Magnanelli, B. S.,& Nasta, L. (2022). Does ESG disclosure influence firm performance? Sustainability, 14(13), 75-95. google scholar
• Chang, Y. J., & Lee, B. H. (2022). The impact of ESG activities on firm value: Multi-level analysis of industrial characteristics. Sustainability, 14(21), 14444. google scholar
• Cheng, M., Green, W., Conradie, P., & Romi, A. (2014). The International Integrated Reporting Framework: Key Issues and Future Research google scholar
• Opportunities. Journal of International Financial Management and Accounting, 25(1), 90-119. google scholar
• Dalal, K. K., & Thaker, N. (2019). ESG and Corporate Financial Performance: A Panel Study of Indian Companies. IUP Journal of Corporate Governance, 18(1), 44- 59. google scholar
• Driscoll, J., & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Data. Review of Economics and Statistics, 80, 549-560. https://doi.org/ 10. 1162/003465398557825. google scholar
• D’Agostino R.B., Belanger A., D’Agostino R.B., 1990, “Suggestion for Using Powerful and Informative Tests of Normality, The American Statistican, 44 (4), 316-321. google scholar
• Hausman J. A., (1978), Spesification Test in Econometrics, Econometrica, 46 (6), 1251.1271. google scholar
• Jarque C. M., Bera A. K., (1987) A Test for Normality of Observations and Regression Residuals , International Statistical Review, 55 (2), 163-172. google scholar
• Karyağdı, N. G., & Şit, A. (2023) İşletmelerin ESG Performanslarının Sermaye Maliyeti ve Finansal Performansına Etkisi: Bist Sürdürebilirlik-25 Endeksi Üzerine Bir Uygulama. Bucak İşletme Fakültesi Dergisi, 6(2), 277-292. google scholar
• Klein, J.G. & Dawar, N. (2004), Corporate Social Responsibility and Consumers Attributions and Brand Evaluations in Product Harm Crisis. International Journal of Research in Marketing, 21(3), ss. 203-217. google scholar
• Korkmaz, T. & Nur, T. (2023). The Effect of ESG Sustainability on Firm Performance: A View under Size and Age on BIST Bank Index Firms. Journal of Research in Economics, Politics & Finance, 8(2): 208-223. google scholar
• Kuhlman, T.,& Farrington, J., 2010. What is sustainability?. Sustainability, 2(11), 3436-3448. google scholar
• Landi, G., & Sciarelli, M. (2019). Towards a more ethical market: the impact of ESG rating on corporate financial performance. Social responsibility journal, 15(1), 11-27. google scholar
• Lee, J. H., Kang, Y. S., & Kim, S. S. (2018). Corporate social responsibility and financial performance in Korean retail firms. Journal of Distribution Science, 16(5), 31-43. google scholar
• Levene H., (1960), Robust Test for Equality of Variannces in Olkin I., Ghurye G., Hoeffding W., Madow W. G. and Mann H. B. (eds.), Contributions to Probability and Statistics: Stanford, California: Stanford University Press, 278-292. google scholar
• Mollaahmetoğlu E. (2023). ESG Skorları Finansal Performansı Etkiliyor Mu? Borsa İstanbul’dan Kanıtlar, Teorik ve Uygulamalı Sürdürülebilirlik Çalışmaları, Nobel Akademik Yayıncılık, 179-191. google scholar
• Ortas E., Alvarez I., & Garayar A. (2015). The Environmental, Social, Governance, and Financial Performance Effects on Companies that Adopt the United Nations Global Compact. Sustainability. 7(2) 1932-1956; doi:10.3390/su7021932. google scholar
• Ramsey, J. B. (1969). Tests for Specification Errors in Classical Linear Least-Squares Regression Analysis. Journal of the Royal Statistical Society, 31, 350-371. google scholar
• Shih, C. M., Gwizdalski, A., & Deng, X. (2023). Building a Sustainable Future: Exploring Green Finance, Regenerative Finance, and Green Financial Technology. World Scientific Annual Review of Fintech, 1, 2350002. google scholar
• Şişman, E. M., & Çankaya, S. (2021). Çevresel, Sosyal ve Kurumsal Yönetişim (ESG) Verilerinin Firmaların Finansal Performansına Etkisi: Hava Yolu Sektörü Üzerine Bir Çalışma. Çukurova Üniversitesi İİBF Dergisi, 25(1), 73-91. google scholar
• Taliento M, Favino C & Netti A. (2019).Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe. Sustainability. 11(6):1738. google scholar
• Topak, M.S. (2018). Çalışma Sermayesi Yönetiminin Karlılığa Etkisi: BIST Ticaret Endeksi Üzerine Bir Araştırma. Mali Çözüm Dergisi, 28, 71-93. google scholar
• Ting, I. W. K., Azizan, N. A., Bhaskaran, R. K., & Sukumaran, S. K. (2020). Corporate Social Performance and Firm Performance: Comparative Study Among Developed and Emerging Market Firms. Sustainability, 12(1), 26-35. google scholar
• Velte, P. (2017), "Does ESG performance have an impact on financial performance? Evidence from Germany", Journal of Global Responsibility, 8(2), 169-178. google scholar
• White Halbert (1980). A Heteroskedasticity-Consistent Covariance Matrix Estimator and A Direct Test for Heteroskedasticity, Econometrica, 48, 817-838. google scholar
• Wu, S., Li, X., Du, X., &Li, Z. (2022). The impact of ESG performance on firm value: The moderating role of ownership structure. Sustainability, 14(21), 14507. google scholar