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The Analysis of The Dynamic Relationship between Corporate Sustainability and Financial Performance

Author

Listed:
  • Aydoğan, Ebru

    (Bursa Uludag University)

  • Kara, Esen

    (Bursa Uludag University)

Abstract

One of the frequently mentioned issues in the literature is that studies analyzing the relationship between corporate sustainability and financial performance do not reach a consensus on the existence and direction of the relationship. This study is aimed to contribute to the literature by analyzing the relationship between corporate sustainability practices and financial performances of 58 non-bank firms included in the Borsa Istanbul (BIST) Sustainability Index between the years 2015-2021. The study employed the System Generalized Method of Moments (system GMM) estimator, which is one of the dynamic panel data models. The results of the analysis can be summarized as follows; (i) there is a positive relationship between corporate sustainability practices and both market-based and accounting-based financial performance indicators, (ii) corporate sustainability positively affects different financial performance indicators at different terms, (iii) sustainability investments affect the market value of businesses more and faster than the return on assets, and (iv) the relationship between corporate sustainability and financial performance is dynamic, and the endogeneity problem should be taken into account in the analysis of the relationship between them.

Suggested Citation

  • Aydoğan, Ebru & Kara, Esen, 2023. "The Analysis of The Dynamic Relationship between Corporate Sustainability and Financial Performance," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 14(2), pages 199-216, April.
    • Handle: RePEc:ris:buecrj:0632
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    Citations

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    Cited by:

    1. Serhii Lehenchuk & Iryna Zhyhlei & Olena Ivashko & Grzegorz Gliszczyński, 2023. "The Impact of Sustainability Reporting on Financial Performance: Evidence from Turkish FBT and TCL Sectors," Sustainability, MDPI, vol. 15(20), pages 1-13, October.

    More about this item

    Keywords

    Corporate Sustainability; Financial Performance; Endogeneity; Panel Data; System GMM;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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