Investigating the Sheltering Effect of Sustainability Indices During the Coronavirus Crash

Yıl 2023, Cilt: 5 Sayı: 3, 182 - 194, 30.09.2023

Burcu Tosun , Pelin Özgen

https://doi.org/10.54821/uiecd.1345196

Öz

This study aims to demonstrate that making sustainability investments benefits a firm not just in terms of enhanced investor trust and visibility, but also in terms of providing a safe haven for them during difficult times. For this purpose, the abnormal returns of the companies which are listed in the Sustainability Index of Borsa Istanbul are compared with the rest of the companies during the “Coronavirus crash” which took hold of every financial market in the world. To determine if the businesses represented by the BIST SI are less impacted by the Covid-19 crash than the rest, an independent samples t-test is used. The primary approach used is event study methodology, where the Leybourne, Newbold & Vougas (LNV) test for the BIST100 index is applied to confirm the impact of the "event" in question. Findings show that, like other financial markets, Borsa Istanbul had a price drop in March 2020. Also, it was observed that inclusion in the Sustainability Index reduced average loss. This implies that it is reasonable to make sustainable investments and, as a result, to be included in the sustainability indexes, as inclusion has been found to be particularly helpful in reducing loss during crisis times.

Anahtar Kelimeler

Sustainability Index, Coronavirus Crash, Event Study Methodology, Corporate Social Responsibility

Koronavirüs Çöküşü Sırasında Sürdürülebilirlik Endekslerinin Koruma Etkisinin İncelenmesi

Öz

Bu çalışma, kurumların gerçekleştirdiği sürdürülebilirlik yatırımlarının sadece yatırımcı güvenini ve firma görünürlüğünü artırmakla kalmayıp, aynı zamanda onlara zorlu zamanlarda güvenli bir sığınak sağlama konusunda da fayda sağladığını göstermeyi amaçlamaktadır. Bu amaç doğrultusunda, Borsa İstanbul Sürdürülebilirlik Endeksi'nde listelenen şirketlerin, dünya finans piyasalarını etkileyen "Koronavirüs çöküşü" sırasında elde ettikleri anormal getirileri diğer şirketlerle karşılaştırmaktadır. Bu amaçla, öncelikli olarak BIST SE kapsamındaki şirketlerin Covid-19 çöküşünden etkilenme derecelerinin diğerlerine göre daha düşük olup olmadığını belirlemek için bağımsız örneklemler t-testi kullanılmıştır. Çalışmada kullanılan temel yaklaşım, BIST100 endeksi kapsamında (Leybourne, Newbold ve Vougas) LNV testinin uygulandığı olay çalışması metodolojisine dayanmaktadır. Bulgular, diğer finansal piyasalar gibi Borsa İstanbul'un da Mart 2020'de değer kaybına uğradığını göstermektedir. Ayrıca, Sürdürülebilirlik Endeksi'nde yer almanın ortalama kaybı azalttığı gözlemlenmiştir. Bu durum, sürdürülebilir yatırımların mantıklı bir tercih olduğunu ve kriz dönemlerinde kaybı azaltmada özellikle yardımcı bir rol oynadığını belirtmektedir.

Anahtar Kelimeler

Sürdürülebilirlik Endeksi, Koronavirüs Çöküşü, Olay Çalışması, Kurumsal Sosyal Sorumluluk

Kaynakça

• Alber, N. (2020). The effect of coronavirus spread on stock markets: the case of the worst 6 countries. SSRN Electronic Journal, 10.2139/ssrn.3578080.
• Albuquerque, R., Koskinen, Y., Yang, S., & Zhang; C. (2020). Resiliency of environmental and social stocks: an analysis of the exogenous covid-19 market crash. The Review of Corporate Finance Studies, 9(3), 593-621.
• Almarayeh, T. (2020). COVID-19 and stock markets response in developing countries: the case of mena countries. Available at SSRN: https://ssrn.com/abstract=3628395.
• Ashraf, B. N. (2020). Economic impact of government interventions during the Covid-19 pandemic: international evidence from financial markets. Journal of Behavioral and Experimental Finance, 27, 1-9.
• Baker, S. R., Bloom, N., Davis, S. J., Kost, K., Sammon, M., & Viratyosin, T. (2020). The unprecedented stock market reaction to Covid-19 pandemics: Long-run effects. NBER Working Papers 26945, National Bureau of Economic Research Inc., 1, 33–42.
• Basdas, U. & Oran, A. (2014). Event studies in Turkey. Borsa Istanbul Review. 14(3), 167-188.
• Bayraktar, A. (2020). Covid 19 pandemisinin finansal etkileri: BİST imalat sektörü uygulaması. Turkish Studies. 15(8), 3415-3427.
• BIST Sustainability Index. https://www.borsaistanbul.com/en/sayfa/2227/bist-sustainability-index (accessed on January 08, 2023).
• Bormane, S., Skiltere, D., & Batraga, A. (2017). Sustainability: economic, environmental and public issues. marketing possibilities. Journal of Regional and Development Studies, 23 (3), 21–35.
• Brusnahan, P. (2020). Close to half of experts think sustainable investments bring higher returns, https://www.privatebankerinternational.com/news/experts-sustainable-investments-higher-returns/ (accessed on January 06, 2023).
• Cheung A. W. K. (2011). Do stock investors care about corporate sustainability – Evidence from event study. Journal of Business Ethics, 99. (2), 145-165.
• Cheung A. W. K., & Roca E. (2013). The effect on price, liquidity and risk when stocks are added to and deleted from a sustainability index: Evidence from the Asia Pacific context. Journal of Asian Economics, 24, 51-65.
• Çıtak L., & E. Ersoy. (2016). Firmaların BIST sürdürülebilirlik endeksine alınmasına yatırımcı tepkisi: Olay çalışması ve ortalama testleri ile bir analiz. Uluslararası Alanya İşletme Fakültesi Dergisi. 8 (1), 43-57.
• Consolandi C., Jaiswal-Dale A., Poggiani E., & Vercelli A. (2009). Global standards and ethical stock indexes: The case of the Dow Jones sustainability stoxx index. Journal of Business Ethics, 87, 185-197.
• Coy, P. (2020). The great Coronavirus Crash of 2020 is different. Retrieved from., https://www.bloomberg.com/news/articles/2020-03-19/the-great-coronavirus-crash-of-2020-is-different. (Accessed on January 10, 2023).
• Cunha, F. A. F., & Souza; Samanez, C. P. (2013). Performance analysis of sustainable investments in the Brazilian stock market: A study about the corporate sustainability index (ISE). Journal Business Ethics, 117, 19-36.
• Daszyńska-Żygadło, K., Szpulak, A., & Szyszka, A. (2014). Investor sentiment, optimism and excess stock market returns: Evidence from emerging markets. Business and Economic Horizons (BEH), Prague Development Center (PRADEC), 10(4), 1-12.
• Delattre, E. (2007). La méthodologie des études d’événements en marketing. Recherche et Applications en Marketing, 22(2), 57-76.
• Durand, R., Hawn, O., & Ioannou, I. (2019). Willing and able: A general model of organizational responses to normative pressures. Academy of Management Review, 44 (2), 299–320.
• Dyckman, T., Philbrick, D., & Stephan, J. (1984). A comparison of event study methodologies using daily stock returns: A simulation approach. Journal of Accounting Research, 1-30.
• Engelhardt, N., Krause, M., Neukirchen, D., & Posch, P. (2020). What drives stocks during the corona-crash? News attention vs. rational expectation. Sustainability, 12, 5014.
• Fernando, J. (2020). FTSE4 Good index series. https://www.investopedia.com/terms/f/ftse4good-index.asp (accessed on January 08, 2023).
• Gök, İ. Y., & Gökşen, H. (2020). Bankaların sürdürülebilirlik endeksine dahil edilmelerinin hisse senedi getirileri üzerindeki etkisi. Süleyman Demirel Üniversitesi Vizyoner Dergisi, 11(26), 89-106.
• Göker, İ. E. K., Eren, B. S., & Karaca, S. S. (2020). The impact of the COVID-19 (Coronavirus) on the Borsa Istanbul sector index returns: An event study. Gaziantep University Journal of Social Sciences, Special Issue, 14-41.
• Green, S. B., Salkind, N. J., & Akey, T. M. (2000). Using SPSS for windows: analysing and understanding data (2nd ed.). Upper Saddle River: Prentice-Hall.
• Hawn, O., Chatterji, A. K., & Mitchell, W. (2018). Do investors actually value sustainability? New evidence from investor reactions to the Dow Jones sustainability index (DJSI). Strategic Management Journal, 39(4), 949–976.
• He, P., Sun, Y., Zhang, Y., & Li, T. (2020). COVID–19’s impact on stock prices across different sectors—An event study based on the Chinese stock market. Emerging Markets Finance and Trade, 56. 2198-2212.
• Hogan, C. (2020). Coronavirus stock market crash: what’s next? https://www.daveramsey.com (accessed on January 05, 2023).
• Hsu, C. W., & Chang, D. S. (2017). Investigating critical organizational factors toward sustainability index: insights from the Taiwanese electronics industry. Business Ethics: A European Review, 26(4), 468-479.
• Ioannou, I., & Serafeim, G. (2020). The impact of corporate social responsibility on investment recommendations. SSRN Working Paper Series.
• Iyke, B. N. (2020). The disease outbreak channel of exchange rate return predictability: Evidence from COVID-19. Emerging Markets Finance and Trade, 56(10), 2277–2297.
• Kaspereit, T. & Lopatta, K. (2016). The value relevance of SAM's corporate sustainability ranking and GRI sustainability reporting in the European stock markets. Business Ethics: A European Review, 25(1), 1-24.
• Kılıç, Y. (2020). Borsa İstanbul’da COVID-19 (Koronavirüs) etkisi. Journal of Emerging Economies and Policy, 5(1), 66-77.
• Kim, D. S., Yeo, E., & Zhang, L. (2021). Do cross-listed firms have a better governance structure and lower agency costs? evidence from Chinese firms. Sustainability, 13, 1734.
• Lee, W. Y., Jiang, C. X., & Indro, D. C. (2002). Stock market volatility, excess returns, and the role of investor sentiment. Journal of Banking and Finance, 26, 2277-2299.
• Leybourne, S. J., Newbold, P., & Vougas, D. (1998). Unit roots and smooth transitions. Journal of Time Series Analysis, 19, 83-97.
• Lo, K. Y., & Kwan, C. L. (2017). The effect of environmental, social, governance and sustainability initiatives on stock value—Examining market response to initiatives undertaken by listed companies. Corporate Social Responsibility and Environmental Management, 24(6), 606–619.
• López, M., Garcia, A. I., & Rodriguez, L. (2007). Sustainable development and corporate performance: a study based on the Dow Jones sustainability index. Journal of Business Ethics, 75(3), 285-300.
• Lourenco, I. C., Branco, M. C., Curto, J. D., & Eugenio, T. (2012). How does the market value corporate sustainability performance? Journal of Business Ethics, 108(4), 417–428.
• Macmuddah, Z., Utomo, S. D., Suhartono, E., Ali, S., & Ghulam, W.A. (2020). Stock market reaction to COVID-19: evidence in customer goods sector with the implication for open innovation. Journal of Open Innovation: Technology, Market, and Complexity, 6(99), 1-13.
• Margolis J. D., Elfenbein H. A., & Walsh J. P. (2009). Does it pay to be good...and does it matter? a meta‐analysis of the relationship between corporate social and financial performance. SSRN Electronic Journal, 1– 68.
• Marti, C. P., Rovira‐Val, M. R., & Drescher, L. G. (2015). Are firms that contribute to sustainable development better financially? Corporate Social Responsibility and Environmental Management, 22(5), 305-319.
• Mazur, M., Dang, M., & Vega., M. (2020). Covid-19 and the March 2020 stock market crash: Evidence from S&P1500. Finance Research Letters, 38, 101690.
• McKibbin, W. J., & Fernando, R. (2020). The global macroeconomic impacts of COVID-19: Seven scenarios. https://ssrn.com/abstract=3547729, (accessed on January 09, 2023).
• Morrone, A. (2020). An angel’s insights, investing in a crisis. http://venturetinkers.com/an-angels-insights-investing-in-a-crisis-interview-with-angelica-morrone/ (accessed on January 06, 2023).
• Moskowitz, T. J., & Grinblatt; M. (1999). Do industries explain momentum? Journal of Finance, 54(4), 1249-1290.
• Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Losifidis, C., Ağha, M., & Ağha, R. (2020). The socio-economic implications of the Coronavirus pandemic (COVID-19): A review. International Journal of Surgery, 78, 185-193.
• Omay, T., & Emirmahmutoglu, F. (2017). The comparison of power and optimization algorithms on unit root testing with smooth transition. Computational Economics, 49, 623-651.
• Orsato R. J., Garcia, A., & Mendes-da-silva, W. (2014). Sustainability indexes: why join in? A study of the corporate sustainability index (ISE) in Brazil. Journal of Cleaner Production, 96, 1–10.
• Özkan, O. (2020). Volatility Jump: The effect of COVID-19 on Turkey stock market, Gaziantep University Journal of Social Sciences, 19, 386-397.
• Peterson, P. (1989). Event studies: A review of issues and methodology. Quarterly Journal of Business and Economics, 28(3), 36-66.
• Ramelli, S., & Wagner, A. F. (2020). Feverish stock price reactions to COVID-19. Review of Corporate Finance Studies, 9(3), 622–655.
• Salisu, A. A., Sikiru, A. A., & Vo, X. V. (2020). Pandemics and the emerging stock markets. Borsa Istanbul Review, 20 (1), 540-548.
• Sansa, N. A. (2020). The impact of Covid-19 on the financial markets: Evidence from China and USA. http://ssrn.com/abstract=3562530, (accessed on January 07, 2023).
• Searcy, C., & Elkhawas, D. (2012). Corporate sustainability ratings: An investigation into how corporations use the Dow Jones sustainability index. Journal of Cleaner Production, 35, 79-92.
• Shu, M., & Zhu, W. (2020). Detection of Chinese stock market bubbles with LPPLS confidence indicator. Physica A: Statistical Mechanics and its Applications, 557, 1248-1292.
• Sollis R. (2004). Asymetric adjustment and smooth transitions: a combination of some unit root tests. Journal of Time Series Analysis, 25(3), 409-417.
• Soylu, Ö. B. (2020). Türkiye ekonomisinde COVID-19’un sektörel etkileri. Avrasya Sosyal ve Ekonomi Araştırmaları Dergisi, 7(5), 169-185.
• Unruh, G., Kiron, D., Kruschwitz, N., Reeves, M., Rubel, H., & Meyer, A. (2016). Investing for a sustainable future. mit sloan management review research report. http://sloanreview.mit.edu/projects/investing-for-a-sustainable-future/ (accessed on January 05, 2023).
• Wasara, T. M., & Ganda, F. (2019). The relationship between corporate sustainability disclosure and firm financial performance in Johannesburg Stock Exchange (JSE) listed mining companies. Sustainability, 11, 1-23.
• Wei, A.-P., Peng, C.-L., Huang, H.-C., & Yeh, S.-P. (2020). Effects of corporate social responsibility on firm performance: Does customer satisfaction matter. Sustainability, 12, 7545.
• Windolph, S. E. (2011). Assessing corporate sustainability through ratings: challenges and their causes. Journal of Environmental Sustainability, 1(1), 5.
• Xu, S., Liu, D., & Huang, J. (2015). Corporate social responsibility, the cost of equity capital and ownership structure: An analysis of Chinese listed firms. Australian Journal of Management, 40(2), 245-276.
• Yilmaz, M. K., Aksoy, M., & Tatoglu, E. (2020). Does the stock market value inclusion in a sustainability index? Evidence from Borsa Istanbul. Sustainability, 12, 483.
• Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, 36, 101528.