IDEAS home Printed from https://ideas.repec.org/a/ist/journl/v72y2022i2p823-845.html
   My bibliography  Save this article

Analysis of the Relationship Between Financial Failures and Sustainability Reports of Companies Publishing SASB Reports

Author

Listed:
  • Buse Oktem

    (Istanbul Universitesi, Iktisat Fakultesi, Isletme Bolumu, Muhasebe Anabilim Dali, Istanbul, Turkiye)

  • Selahattin Karabinar

    (Istanbul Universitesi, Sosyal Bilimler Enstitusu Iktisat Fakultesi Isletme Bolumu, Istanbul, Turkiye)

Abstract

What the relationship is between a company’s sustainability report and its financial performance is a question awaiting an answer. One answer to this question involves determining the place and impact financial sustainability has with regard to overall sustainability. As such, this article analyzes the relationship between the concept of sustainability and the concept of financial failure based on whether companies with a high probability of financial failure published a sustainability report in the same period. As an indicator of financial failure, the Z’’ score developed by Altman and Hotchkiss (2006) for non-manufacturing and specific industries (retailers, telecommunications, airlines, etc.) was taken as the basis. The transportation sector was selected among the companies with published SASB reports because the transportation sector is one of the certain nonmanufacturing sectors for which the Z” score was developed. This sector shows 43 companies that have published SASB reports and financial data to be accessible for 40 companies. However, no Z’’ score has been calculated for companies founded since 2017, thus the Altman Z’’scores were calculated according to the five-year financial statements 39 companies had published between 2016-2020. The study examines whether companies with a Z’’ score under 4.35 (indicating financial difficulty) and companies with a Z’’ score between 4.35-5.85 (indicating the financial gray zone) have published sustainability reports. The results of the paper show the number of companies that published sustainability reports to have increased in recent years, even companies that are in trouble or financial uncertainty. In other words, eight companies were found to be in financial distress for the five years between 2016-2020, with four of these companies having published sustainability reports during that time, three being airline companies and one operating in the automobile sector.

Suggested Citation

  • Buse Oktem & Selahattin Karabinar, 2022. "Analysis of the Relationship Between Financial Failures and Sustainability Reports of Companies Publishing SASB Reports," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 72(72-2), pages 823-845, December.
    • Handle: RePEc:ist:journl:v:72:y:2022:i:2:p:823-845
    DOI: 10.26650/ISTJECON2021-1051041
    as

    Download full text from publisher

    File URL: https://cdn.istanbul.edu.tr/file/JTA6CLJ8T5/4AE9ED91729849348B0337277FEA0185
    Download Restriction: no
    File URL: https://iupress.istanbul.edu.tr/en/journal/ije/article/sasb-raporu-yayinlayan-sirketlerin-finansal-basarisizliklari-ile-surdurulebilirlik-raporlari-arasindaki-iliskinin-analizi
    Download Restriction: no
    File URL: https://libkey.io/10.26650/ISTJECON2021-1051041?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    2. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    3. Laura Bini & Marco Bellucci, 2020. "Integrated Sustainability Reporting," Springer Books, Springer, number 978-3-030-24954-0, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barbara Su, 2023. "Banking practices and borrowing firms’ financial reporting quality: evidence from bank cross-selling," Review of Accounting Studies, Springer, vol. 28(1), pages 201-236, March.
    2. Shaikh, Ibrahim A. & O'Brien, Jonathan Paul & Peters, Lois, 2018. "Inside directors and the underinvestment of financial slack towards R&D-intensity in high-technology firms," Journal of Business Research, Elsevier, vol. 82(C), pages 192-201.
    3. Mikel Bedayo & Gabriel Jiménez & José-Luis Peydró & Raquel Vegas, 2020. "Screening and Loan Origination Time: Lending Standards, Loan Defaults and Bank Failures," Working Papers 1215, Barcelona School of Economics.
    4. Ruey-Ching Hwang, 2013. "Forecasting credit ratings with the varying-coefficient model," Quantitative Finance, Taylor & Francis Journals, vol. 13(12), pages 1947-1965, December.
    5. Antonio Davila & George Foster & Xiaobin He & Carlos Shimizu, 2015. "The rise and fall of startups: Creation and destruction of revenue and jobs by young companies," Australian Journal of Management, Australian School of Business, vol. 40(1), pages 6-35, February.
    6. Masahiro Enomoto, 2018. "Effects of Corporate Governance on the Relationship between Accounting Quality and Trade Credit: Evidence from Japan," Discussion Paper Series DP2018-12, Research Institute for Economics & Business Administration, Kobe University, revised Dec 2023.
    7. Chen, Peimin & Wu, Chunchi, 2014. "Default prediction with dynamic sectoral and macroeconomic frailties," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 211-226.
    8. Knyazeva, Anzhela & Knyazeva, Diana, 2012. "Does being your bank’s neighbor matter?," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1194-1209.
    9. Giordani, Paolo & Jacobson, Tor & Schedvin, Erik von & Villani, Mattias, 2014. "Taking the Twists into Account: Predicting Firm Bankruptcy Risk with Splines of Financial Ratios," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(4), pages 1071-1099, August.
    10. Li, Chunyu & Lou, Chenxin & Luo, Dan & Xing, Kai, 2021. "Chinese corporate distress prediction using LASSO: The role of earnings management," International Review of Financial Analysis, Elsevier, vol. 76(C).
    11. Suzan Hol, 2006. "The influence of the business cycle on bankruptcy probability," Discussion Papers 466, Statistics Norway, Research Department.
    12. Gropp, R. & Grundl, C. & Guttler, A., 2012. "Does Discretion in Lending Increase Bank Risk? Borrower Self-Selection and Loan Officer Capture Effects," Other publications TiSEM bfec5360-2a2b-47e4-ba3f-d, Tilburg University, School of Economics and Management.
    13. Pavol Durana & Lucia Michalkova & Andrej Privara & Josef Marousek & Milos Tumpach, 2021. "Does the life cycle affect earnings management and bankruptcy?," Oeconomia Copernicana, Institute of Economic Research, vol. 12(2), pages 425-461, June.
    14. Dinh, K. & Kleimeier, S., 2006. "Credit scoring for Vietnam's retail banking market : implementation and implications for transactional versus relationship lending," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    15. Park, Moon Deok & Han, Seung Hun, 2023. "Pay dispersion and CSR," Finance Research Letters, Elsevier, vol. 51(C).
    16. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 89-103, June.
    17. Elizaveta Danilova & Evgeny Rumyantsev & Ivan Shevchuk, 2018. "Review of the Bank of Russia – IMF Workshop 'Recent Developments in Macroprudential Stress Testing'," Russian Journal of Money and Finance, Bank of Russia, vol. 77(4), pages 60-83, December.
    18. Alderson, Michael J. & Betker, Brian L. & Halford, Joseph T., 2021. "Fictitious dividend cuts in the CRSP data," Journal of Corporate Finance, Elsevier, vol. 71(C).
    19. Pesaran, M. Hashem & Schuermann, Til & Treutler, Bjorn-Jakob & Weiner, Scott M., 2006. "Macroeconomic Dynamics and Credit Risk: A Global Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(5), pages 1211-1261, August.
    20. Zhou, Fanyin & Fu, Lijun & Li, Zhiyong & Xu, Jiawei, 2022. "The recurrence of financial distress: A survival analysis," International Journal of Forecasting, Elsevier, vol. 38(3), pages 1100-1115.

    More about this item

    Keywords

    Financial failure; Sustainability; Altman Z’’ score JEL Classification: M41 ; M49 ; Q56;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ist:journl:v:72:y:2022:i:2:p:823-845. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ertugrul YASAR (email available below). General contact details of provider: https://edirc.repec.org/data/ifisttr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.