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

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  • Halil Ä°brahim Akpınar

    (İstanbul University, Institute of Social Sciences, Department of Business Administration, İstanbul, Türkiye)

  • Mehmet Sabri Topak

    (İstanbul University, Faculty of Economics, Department of Business Administration, İstanbul, Türkiye)

Abstract

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.

Suggested Citation

  • Halil Ä°brahim Akpınar & Mehmet Sabri Topak, 2024. "The Effect of ESG (Environmental, Social And Governance) Scores on Company Performance: Evidence from the Manufacturing Industry in Turkey," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(41), pages 109-117, December.
    • Handle: RePEc:ist:ekoist:v:0:y:2024:i:41:p:109-117
    DOI: 10.26650/ekoist.2024.41.1540173
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    References listed on IDEAS

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    1. A. Bhargava & L. Franzini & W. Narendranathan, 2006. "Serial Correlation and the Fixed Effects Model," World Scientific Book Chapters, in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 4, pages 61-77, World Scientific Publishing Co. Pte. Ltd..
    2. Turhan Korkmaz & Tuğba Nur, 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, Ersan ERSOY, vol. 8(2), pages 208-223.
    3. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    4. Halil İbrahim Akpınar & Mehmet Sabri Topak, 2024. "The Effect of ESG (Environmental, Social And Governance) Scores on Company Performance: Evidence from the Manufacturing Industry in Turkey," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(41), pages 109-117, December.
    5. Shiyu Wu & Xinyi Li & Xiaosen Du & Zexin Li, 2022. "The Impact of ESG Performance on Firm Value: The Moderating Role of Ownership Structure," Sustainability, MDPI, vol. 14(21), pages 1-22, November.
    6. Marco Taliento & Christian Favino & Antonio Netti, 2019. "Impact of Environmental, Social, and Governance Information on Economic Performance: Evidence of a Corporate ‘Sustainability Advantage’ from Europe," Sustainability, MDPI, vol. 11(6), pages 1-26, March.
    7. Silvia Carnini Pulino & Mirella Ciaburri & Barbara Sveva Magnanelli & Luigi Nasta, 2022. "Does ESG Disclosure Influence Firm Performance?," Sustainability, MDPI, vol. 14(13), pages 1-18, June.
    8. Yu-Jin Chang & Byung-Hee Lee, 2022. "The Impact of ESG Activities on Firm Value: Multi-Level Analysis of Industrial Characteristics," Sustainability, MDPI, vol. 14(21), pages 1-17, November.
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    1. Halil İbrahim Akpınar & Mehmet Sabri Topak, 2024. "The Effect of ESG (Environmental, Social And Governance) Scores on Company Performance: Evidence from the Manufacturing Industry in Turkey," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(41), pages 109-117, December.

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