The effect on inclusion in the sustainablity index on the company performance for developing countries

Efforts by world stock markets on sustainability have led to the rise of developments in Sustainability Indexes. The companies included in these indices are selected from the most successful companies in terms of social performance. However, discussions continue on how good social performance affects company profitability. In this study, it was investigated how the companies financial performance is affected if the companies are included in the Sustainability Index. In this study, the companies that have uninterrupted data from 2014 to 2017 in Turkey, Brazil and Indonesia, which are located in developing countries, were examined. In this study, return on asset (ROA) were used as dependent variable, which is profitability measure, and inclusion in the Sustainability index was used as independent variable. Control variables are determined in accordance with the literature as Debt / Equity ratio, operational ratio and total assets. Panel data analysis was used as a method of study and each country was evaluated through its own data. As a result of this study, it has been determined that inclusion in the Sustainability Index in Turkey and Brazil has a positive impact on the financial performance of the company. It has been concluded that the inclusion in the Sustainability index in Indonesia has no statistically impact on the financial performance of the company. In addition, some results were obtained in terms of control variables. There was a negative relationship between the operational ratio and ROA, and there was a positive relationship between total assets and ROA of Turkish companies. For Brazilian companies, it is found that there is a negative relationship between operational ratio and return on asset, and another negative relationship between total assets and return on asset, it is concluded that there is a positive relationship between debt / equity ratio and return on asset. For Indonesia, it is found that there is a positive relationship between total assets and return on asset, it is concluded that there is a negative relationship between operational ratio and return on asset, and another negative relationship between debt / equity ratio and return on asset.