The impact of financial risk and performance of businesses included in the BİST sustainability index on the share prices

The concept of "sustainability" remains influential in the global decisions of both businesses and investors. The value businesses place on sustainability-related activities and the investments conducted in this direction are monitored and encouraged by stakeholders. Particularly, the fact that societies, investors, consumers, and governments follow businesses that engage in socially responsible production and investment activities gives those organizations a competitive edge. Consequently, the relationship between sustainability activities, financial risks, and the financial performance of businesses and stock value have become the subject of research for academics, investors, and intermediary organizations. This study investigates the effect of financial risks and financial performance of the businesses included in the sustainability index on the stock value by using the data from 2011 to 2020. The impact of financial risks and the financial performance of the businesses included in the sustainability index on stock rate of return was investigated using panel data analysis. The findings of the study revealed a positive and significant relationship between the financial risks (Z Score) of the businesses and the stock rate of return. In other words, as the financial risks (Z Score) of the businesses increased, the rate of return on the stock increased. On the other hand, a positive and statistically significant relationship was found between return on equity and stock value, which are among financial performance indicators. In addition, as a result of the study, when the rate of return on the stock of the businesses were examined before and after they were included in the Sustainability Index, it was determined that the rate of return on the stock of 63% of the businesses increased after being included in the Sustainability Index. Keywords: Sustainability, Financial Risk, Financial Performance, Panel Data Analysis, Altman Model