Corporate Governance’s Impact on Sustainable Finance: An Analysis of Borsa Istanbul Energy Sector Companies

Abstract

The main purpose of this study is to conduct an evaluation based on listed companies traded in the energy sector sub-market of Borsa Istanbul (BIST). This evaluation is conducted on a sample of 27 companies between 2016 and 2021. In this study, corporate governance indicators are used as independent variables, while financial performance indicators are used as dependent variables. Initially, descriptive statistics of the sample and correlations between variables were calculated and interpreted in the analysis, and the Panel Data Analysis method is applied for the interaction between variables. This study emphasizes the importance of global economic and social crises, rapid changes in communication technologies, and the concept of sustainability for businesses. The sustainability of financing is highlighted as vital for companies. The findings of the study may serve as a valuable resource for understanding the performance of companies operating in the energy sector sub-market of BIST and their relationships with sustainability.

1. Introduction

Since the last quarter of the 20th century, rapid changes have occurred in many areas due to economic and social crises on a global scale, accompanied by the acceleration of technological tools. These changes have highlighted the necessity of a dynamic and adaptable structure for businesses in line with their physical and economic environment, particularly in the field of communication technologies. Environmental and climate crises have been triggering factors in the conceptual framework of sustainability. In the economic field, the sustainability of financing is of vital importance for businesses. According to the generally accepted free market conditions on a global scale, businesses are the fundamental elements of the economic habitat. The concept of sustainability, which refers to the continuous flow and transformation of limited resources for healthy utilization within a certain process, was initially introduced in relation to environmental consciousness, but its importance in terms of financing was understood shortly thereafter.

The aim of this study is to examine the relationship between corporate governance and financial sustainability, which are two interconnected concepts for the healthy continuation of a business’s activities, by revealing the changes experienced based on past experiences. For this purpose, firstly, detailed information about these two concepts is provided. After this information, the meaningful connection between sustainability, financial performance, and corporate governance principles applied by publicly traded market companies will be investigated [1,2,3]. In line with the propositions put forward in our study, the direction and effectiveness of the connection between corporate governance and sustainable finance will be questioned and tested based on concrete data. Our study will allow us to create a synthesis based on a literature review and data from our fieldwork.

Our study contributes to the existing literature on the relationship between corporate governance and financial performance in the energy sector. While several studies have explored the impact of corporate governance on financial performance, this study focuses specifically on the energy sector companies listed on Borsa Istanbul (BIST), providing valuable insights into this specific market. One key aspect that sets this study apart from previous research is its emphasis on sustainable finance. By incorporating environmental, social, and governance (ESG) factors alongside financial indicators, the study recognizes the importance of long-term sustainability in evaluating financial performance. This integration of sustainable finance and corporate governance distinguishes this research from studies that solely concentrate on financial aspects without considering broader sustainability concerns. Moreover, our study adopts a panel data analysis method, allowing for a comprehensive analysis of the sample of 27 energy sector companies over a five-year period from 2016 to 2021. By employing this approach, the study captures the dynamics and trends within the energy sector and provides a more robust understanding of the relationship between corporate governance indicators and financial performance. The findings of this study contribute to the literature by identifying specific corporate governance indicators that significantly impact financial performance in the BIST energy sector sub-market. The examination of indicators such as Board Size, IDIR, DUAL, GENDR, MEETNG, and COMSIZE provides novel insights into the factors influencing financial outcomes such as ROI, ROA, ROE, LEV, and LIQ. For instance, the study highlights the positive correlation between larger boards of directors and higher ROI and ROA, indicating the importance of board diversity and expertise. Furthermore, the study reveals the potential pitfalls of combining the roles of CEO and Chairman, which may lead to financing preferences that do not align with the company’s financial health. This finding underscores the significance of separating these roles to ensure effective decision making and accountability. Additionally, the study uncovers the negative effect of excessive board meetings on liquidity, suggesting the need for optimal board meeting frequencies to avoid inefficiencies. This finding highlights the importance of balancing board engagement and efficient resource allocation. Overall, this study’s contributions lie in its focus on sustainable finance, its analysis of the energy sector companies in BIST, and its identification of specific corporate governance indicators that impact financial performance. By shedding light on these relationships, the study provides valuable insights for businesses operating in the BIST energy sector, assisting them in improving their corporate governance practices and enhancing their financial performance. Ultimately, this research contributes to the broader understanding of the importance of integrating corporate governance principles with sustainable finance for the long-term success and sustainability of companies operating in the energy sector.

Conceptual Framework of Corporate Governance

Corporate governance is a management approach that encompasses the management and control structure of companies, stakeholder relationships, accountability and transparency mechanisms, and risk management (OECD, 2004) [4]. Corporate governance is an approach that aims to provide value to all stakeholders, from employees to investors, customers, suppliers, and the community (ICGN, 2021) [5].

The principles of corporate governance are determined by international organizations such as the International Corporate Governance Network (ICGN), the OECD, and the United Nations. These principles aim to ensure that companies’ activities are managed in a transparent, accountable, fair, and responsible manner (OECD, 2004). Additionally, corporate governance principles are critical to maintaining companies’ long-term sustainability and protecting the interests of stakeholders (UNGC, 2015) [6].

Corporate governance is the managerial competence that ensures the impartial, reliable, accurate, and comprehensive protection of the rights of the board of directors, employees, shareholders, and investors of a company [7]. Therefore, companies that embrace good corporate governance practices are considered investable at both international and national levels. As a result, businesses that have implemented corporate governance practices are preferred by their stakeholders. Corporate governance became a defined objective with the principles published by the Organization for Economic Cooperation and Development (OECD) in 1999 and started to be supported by member countries. Regulatory and guiding institutions have been established in line with these principles at the international and national levels. The concept of corporate governance was first addressed in Turkey in 2002 with the report “Corporate Governance Best Practice Code: Structure and Operation of the Board of Directors” by the Turkish Industry and Business Association (TÜSİAD). Through the Turkish Corporate Governance Association (TKYD), established by TÜSİAD in 2003, various research and training activities have been carried out to increase awareness of the concept. In Turkey, the Capital Markets Board (CMB) is a local institution established for this purpose. In line with the corporate governance principles published by the OECD, CMB published the Corporate Governance Principles in 2003 and revised these principles in 2005.

Table 1. Actions taken in the field of corporate governance by year and country.

Country	Year	Regulation
USA	2002	Sarbanes–Oxley Act
Germany	1998	Corporate Governance Principles (for DAX 30 companies)
Australia	2019	Corporate Governance Code
Brazil	2001	Corporate Governance Principles (for Bovespa Stock Exchange)
China	2001	Company Law (updated)
France	2011	AFEP-MEDEF Corporate Governance Code
India	2014	Company Law (amended)
UK	2018	Corporate Governance Code
Japan	2015	Corporate Governance Principles (for TSE companies)
Canada	2010	Corporate Governance Principles (for TSX companies)
Turkey	2003	Corporate Governance Principles

Source: Created by the authors using various types of digital sources.

summarizes the actions taken in the field of corporate governance by year and country.

Corporate governance practices are an important factor that businesses need to consider for financial sustainability. Corporate governance has multidimensional effects on a company’s performance. In addition to the positive effects on production and service quality, corporate governance also has positive effects on financial statements. Sustainable finance is the financing that evaluates environmental, social, and governance (ESG) issues in providing finance to investors (Sustainable Finance, n.d.). While investors traditionally make investment decisions based on financial data, companies’ ESG reporting and sustainability efforts have become important criteria for investors today. Thus, besides adopting a strong green finance understanding in areas such as reducing negative impacts on the environment, greenhouse gas emissions, and waste, and increasing efficiency in the use of natural resources, supporting economic growth is also desired. The indicator of sustainable finance is defined through Sustainability Indices. When our study was planned, it was intended to be divided into sections and sub-sections and progressed accordingly. In Section 1, a brief introduction and information about the topic will be provided. Section 2 will present a conceptual framework for corporate governance and financial sustainability. A review of the literature on corporate governance and sustainable finance will be provided in Section 3. In Section 4, the relationship between corporate governance and financial sustainability will be discussed. In Section 5, the role of sustainable finance in enhancing corporate governance practices will be emphasized. Finally, in the conclusion section, Section 5, the findings and recommendations of the study will be summarized.

Due to the importance of the topic, numerous academic and legal studies have been conducted on corporate governance in recent years. Companies that adopt good corporate governance practices are considered investable at national and international levels and are preferred by stakeholders and management. By the end of the 20th century, different governance principles were present in many markets, including the Cadbury Report in the UK, along with two other main principles. The most significant official studies where the concept of corporate governance found its place in the world are the 1992 “Cadbury Committee Report,” the 1995 “Greenbury Committee Report,” and the 1998 “Hampel Report” [8].

The Cadbury Committee Report, which was prepared by taking into account the previous court decisions, sets the rules for company management, board of directors’ principles, and the rights that managers can have financially in the context of corporate governance in the UK, including how companies will be listed on the stock exchange.

The Greenbury Report, named after Sir Richard Greenbury, the Chairman of Marks & Spencer, was published in the UK in 1995 and has content related to the responsibility of disclosing to the public information about the financial rights of company executives. Similar to the previous Cadbury Report, it includes provisions for the establishment of a remuneration committee consisting of independent board members for companies listed on the stock exchange, as well as the presentation of an annual financial rights report to stakeholders. All these rules are aimed at increasing transparency and accountability.

The Hampel Report, named after Sir Ronnie Hampel, Chairman of Imperial Chemical Industries (ICI), has similar content.

In the literature, corporate governance and financial performance have generally been studied separately [9]. However, studies examining the relationship between corporate governance and financial performance have also been conducted.

Shleifer and Vishny [10] examined the relationship between corporate governance quality and stock prices. They found that companies with good corporate governance practices experienced higher increases in stock prices compared to companies with poor corporate governance practices.

Yermack [11] investigated the relationship between corporate governance quality and firm valuation in his study “Corporate Governance and Firm Valuation.” He found that companies with good corporate governance practices had higher valuations compared to companies with poor corporate governance practices.

Jensen and Meckling [12] examined the relationship between management and ownership in their study “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure.” They found that companies with good corporate governance practices performed better financially by protecting the interests of their owners.

Agrawal and Knoeber [13] analyzed the relationship between corporate governance quality and company performance. They found that companies with good corporate governance practices had better financial performance compared to companies with poor corporate governance practices.

Drobetz et al. [14] examined the impact of differences in corporate governance quality on corporate performance. In a study conducted on companies listed on the stock exchange in Germany, cross-sectional regression analysis revealed a strong positive relationship between corporate governance quality and firm valuation. However, a negative relationship between expected stock return and corporate governance levels of companies was also found.

Aras and Crowther [15] investigated the relationship between management and corporate sustainability. The researchers examined the corporate governance policies of the top 100 companies in the Financial Times Stock Exchange (FTSE) 100 index. Through qualitative analysis, it was concluded that a better understanding of the process between corporate governance quality and corporate sustainability could lead to more successful corporate governance in addressing companies’ issues.

Donker and Zahir [16] conducted a study on the effects of popular corporate governance rating systems on shareholders and the public. The study examined the evaluations made by rating agencies on corporate performance, legal cases, and similar situations. The methods used by rating agencies to evaluate corporate governance practices, classifications, and variables in rating systems were analyzed. The study emphasized the weak but existing relationship between corporate governance rating performance and corporate performance. Suggestions were made to eliminate the deficiencies in rating systems.

In a study conducted by Karamustafa et al. [17], significant changes in operational or financial performance before and after inclusion in the corporate governance index were examined. The results of the study, using t-tests, revealed significant differences in terms of return on assets, asset turnover, and return on equity between the periods before and after inclusion in the index.

Dağlı et al. [18] conducted a study on the risk and return evaluation of the Corporate Governance Index. In their study, they evaluated different indexes of the Istanbul Stock Exchange (ISE) for the period of 2007–2009. The results showed that companies in the ISE-30 index performed better, while those in the Corporate Governance Index were ranked in the middle.

Berthelot et al. [19] examined the relationship between corporate governance rankings and the value attributed by investors to companies in a study conducted on 289 companies registered in Canada between 2002 and 2005, using panel data analysis. The results revealed that investors’ stock price evaluation is related to corporate governance rankings and accounting results, such as equity and net income.

Çonkar et al. [20] compared the financial performance of companies included in the Corporate Governance Index in 2007 and 2008 with their rankings based on the Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS) method. The results of the study showed that the ranking based on the TOPSIS method differed from the ranking based on corporate governance ratings.

Gond et al. [21] analyzed the relationship between corporate governance and sustainability by examining the sustainability reports of the 30 largest companies in Europe. The findings demonstrate that corporate governance plays a crucial role in determining, implementing, and reporting sustainability strategies of companies.

Ioannou and Serafeim [22] analyzed the relationship between sustainability performance and financial performance of Fortune 500 companies using the panel data analysis method. The findings indicate that companies with high sustainability performance also have high financial performance.

Freeman, Parmar, and Moutchnik [23] examined the views of executives of companies in the United States on sustainability and corporate governance issues through a survey. The findings indicate that executives consider sustainability important and that corporate governance plays a crucial role in ensuring sustainability for companies.

Asif, Sohail, and Ahmed [24] used regression analysis to examine the impact of corporate governance on the sustainability reporting of companies operating in the Gulf Cooperation Council (GCC) countries in the Middle East. The researchers stated that there is a positive relationship between good corporate governance and sustainability reporting, and this relationship is particularly significant due to the positive effects on companies’ financial performance.

Erkılıç, Öztürk, and Aybar [25] used a survey method to analyze the sustainability performance and corporate governance practices of listed companies in Turkey. It was found that there is a positive relationship between the sustainability performance of companies in Turkey and their corporate governance practices. Specifically, it was revealed that corporate governance practices such as board independence and transparency have a significant impact on sustainability performance.

Luna and Navarro [26] employed a survey method to analyze the sustainable value creation performance and corporate governance practices of listed Spanish companies. The authors found that there is a positive relationship between the sustainable value-creation performance of companies in Spain and their corporate governance practices. Specifically, corporate governance practices such as board independence, evaluation of environmental and social impacts, and adherence to the company’s ethical principles were found to have a significant impact on sustainable value creation performance.

Sánchez et al. [27] applied panel data analysis to examine the relationship between female board members of listed companies in Spain and their corporate social responsibility (CSR) performance. According to the results, there is a positive relationship between the CSR performance of companies in Spain and their female board members. These results are consistent with the literature suggesting that the presence of women in boardrooms can provide greater diversity, different perspectives, and more attention to sustainability issues, which can lead to better performance for companies [28].

Li, Hu, and Wang [29] used panel data analysis to analyze the corporate social responsibility (CSR) performance, corporate governance practices, and financial performance of listed companies in China. It was found that there is a positive relationship between CSR performance and financial performance of companies in China with their corporate governance practices. In particular, the presence of independent board members and corporate governance practices such as environmental and social risk management policies were found to have a significant impact on CSR performance and financial performance.

The main hypotheses of this research are as follows:

H0: 

There is a relationship between corporate governance and sustainable finance.

H1: 

There is no relationship between corporate governance and sustainable finance.

2. Materials and Methods

The aim of this study is to conduct an evaluation based on companies trading in the energy sector sub-market of Borsa Istanbul (BIST) between 2016 and 2021. In the initial version of the study, 39 companies whose shares are listed in Borsa Istanbul’s CHEMICAL MEDICINE PETROL TIRE and PLASTIC PRODUCTS were included, and the list of companies included in the analysis can be found in Table 1. Since 10 of these companies were offered to the public in 2020, they were excluded from the sample because they did not have enough data for the analysis period, 2017–2021. Two of them were excluded from the sample because sufficient data could not be obtained in the annual reports. There are 27 companies in the final version of the sample.

The most commonly used indicators to measure a firm’s corporate governance have been included as independent variables in the analysis, in parallel with the international literature. In addition, financial ratios widely accepted as the best indicators of a firm’s financial performance have been included in the analysis as dependent variables, also in accordance with the international literature. Descriptions of the variables used in the analysis are provided in the

Table 2. Variables included in the analysis and their definitions.

Dependent Variables (Financial Performance)	Definition
ROA	Net Income/Av. Total Assets
ROE	Net Income/Av. Total Shareholder’s Equity
ROI	Net Income/Avg. Total Permanent Capital
Leverage	Total Liabilities (Short + Long)/Total Assets
Liquidity (Quick/Cash Ratio)	Cash & Cash Equivalents/Current Assets
Independent Variables (Corporate Governance Practice Compliance)	Definition
Board Size	Number of directors on the board.
% independent directors	Number of directors classified as independent on a board divided by the total number of directors on the board.
CEO/Chairman duality	An indicator variable equal to 1 if the CEO is also the board chair and 0 otherwise.
Board gender diversity	Number of female members on the board.
Board meeting	Number of meetings held by the board during the financial year.
Audit committee size	Number of directors on the audit committee.

Source: Author’s own explanations.

below.

The main aim of the analysis in this study is to determine whether there is a significant effect of the corporate governance practices of firms on their financial performance. In line with this objective, the relationship between corporate governance and financial sustainability will be examined.

Applied Tests and Analyses

The study was conducted using panel data analysis. Data on financial sustainability are correlated by combining cross-sectional observations of companies with a time dimension. In the causal analysis of the relationship between dependent and independent variables, datasets are evaluated in three different forms: time series data, cross-sectional data, and panel datasets [30].

Panel data are defined as time series data or cross-sectional data for multiple sections. Panel data consist of t observations for each of n units. Time series data, on the other hand, consist of the values that a variable or variables take over time. In cross-sectional data, values comprise various samples at a single point in time for the variable or variables.

Panel data analysis allows for the observation of variables over time within the same cross-sectional units. In this regard, a panel dataset is created by combining time series and cross-sectional observations of the observed economic units. Panel data have both a time dimension and a spatial dimension. The data used in the study were obtained from the Public Disclosure Platform (KAP), company websites, and relevant company activity reports.

In the panel analysis, the Driscoll–Kraay standard errors method was applied and the fixed effects model was chosen as the preferred model. The Driscoll–Kraay standard errors method is a correction technique used in panel data analysis. Panel data analysis involves examining data that combine time series and cross-sectional data, focusing on multiple observation units [31]. The Driscoll–Kraay method addresses the issue of heteroscedasticity (variation in the variance) in panel data analysis. It assigns weights to variables in order to correct for heteroscedasticity and obtain accurate standard errors [32]. This method takes into account the autocorrelation (relationship between series) and variance structures of the data, modeling and calculating the relationships between observation units. As a result, standard errors are calculated more accurately, ensuring the statistical reliability of the results. By addressing common issues such as heteroscedasticity and autocorrelation in panel data analysis, the Driscoll–Kraay method helps improve the accuracy of statistical findings. This enhances the reliability and interpretability of panel data analysis results [33].

The fixed effects model is a commonly used model in panel data analysis. In this model, panel data analysis is conducted by taking into account the fixed effects specific to each observational unit. The fixed effects model addresses the differences and heterogeneity among observational units. It assumes that there are fixed effects or impacts specific to each observational unit. These effects can reflect factors that are unique to the observational units and explain a portion of the variability in the analysis. In this model, the fixed effects are included as variables, and constraints are applied to control these effects during estimation. This way, the differences among observational units are held constant, and the effects of variables in the analysis can be estimated more accurately. The fixed effects model is used to analyze factors that do not change over time and are specific to observational units. For example, unique business strategies of a company or industry-specific factors can be modeled as fixed effects in this model. While addressing heterogeneity in panel data analysis, the fixed effects model does not consider the dynamic information obtained from time series data. Compared to other models used in panel data analysis, the fixed effects model provides a more flexible approach to identifying the specific factors related to observational units. Therefore, the fixed effects model can be preferred when understanding and analyzing the differences and uniqueness among observational units is desired.

In the panel data analysis, where corporate governance is the dependent variable, coefficients will be examined. In this investigation, the extent to which corporate governance indicators as independent variables can account for changes in sustainable finance as the dependent variable will be determined by looking at the overall panel.

The parameters regarding corporate governance performance indicators and financial performance were derived from www.kap.org.tr (accessed on 15 June 2023).

3. Research Results

Descriptive statistics for the included variables are shown in

Table 3. Descriptive statistics for the sample.

	Mean	Median	Max	Min	Std. Dev.	Skewness	Kurtosis	Jargue–Bera	Obs.
ROA	0.111	0.095	0.442072	−0.148	0.110	0.558	3.3516	7.7098	135
ROE	0.037	0.209	1.334319	−23.360	2.048	−11.174	128.1573	90,921.26	135
ROI	0.055	0.048	0.221036	−0.074	0.055	0.5583	3.3516	7.7098	135
LEV	0.553	0.603	0.991282	0.106	0.211	−0.4924	2.2273	8.8146	135
LIQ	0.636	0.590	1.041779	0.289	0.251	0.3088	2.1366	6.3394	135
BS	6.644	6	15	3	2.234	1.2690	4.7197	52.8679	135
I_DIR	0.292	0.333	0.5	0	0.133	−1.3164	3.5763	40.8592	135
DUAL	0.326	0	1	0	0.470	0.7427	1.5517	24.2120	135
GENDR	1.193	1	4	0	1.011	0.5209	2.5605	7.19156	135
MEETNG	16.099	12	76	1	14.010	1.8857	7.0957	169.2049	131
COMSIZE	1.896	2	3	0	0.536	−2.7116	11.1134	535,7277	135

Source: Author’s own calculations.

below.

ROA, ROE, and ROI are ratios used to measure financial performance. Their averages are 0.111, 0.037, and 0.055, respectively. It appears that their medians are different from their averages, which could indicate that the data are skewed. LEV and LIQ are ratios used to measure a company’s leverage and liquidity positions. Their averages are 0.553 and 0.636, respectively. It can be seen that their averages are different from their medians, indicating that the data may be skewed. BS is a ratio used to measure the size of a company’s board of directors. Its average is 6.644. Its standard deviation is 2.234, indicating that the data are quite volatile.

A correlation

Table 4. Correlation analysis results for the included variables.

	ROA	ROE	ROI	LEV	LIQ	BS	I_DIR	DUAL	GENDR	MEETNG	COMSIZE
ROA	1
ROE	0.044	1
ROI	0.790	0.044	1
LEV	0.577	0.188	0.577	1
LIQ	−0.035	−0.036	−0.035	−0.054	1
BS	−0.082	0.076	−0.082	0.278	0.012	1
I_DIR	−0.259	0.186	−0.259	0.213	0.016	−0.046	1
DUAL	−0.147	−0.137	−0.147	0.077	−0.004	0.411	0.133	1
GENDR	−0.045	−0.066	−0.045	0.203	0.004	0.083	0.089	0.241	1
MEETNG	−0.018	0.012	−0.018	0.161	−0.062	−0.203	0.118	0.056	−0.028	1
COMSIZE	0.296	−0.028	0.296	0.308	−0.009	0.192	0.436	0.077	0.150	0.134	1

Source: Author’s own calculations.

is a statistical analysis that shows the relationship between two or more variables that are related to each other. In this type of analysis, the relationship between variables is expressed using a correlation coefficient (r) that ranges from −1 to +1.

This correlation table shows the relationship between 11 different variables. The rows and columns represent different variables, while each cell shows the correlation coefficient between two variables in that row and column.

The correlation coefficients between ROA, ROE, and ROI indicate that they have strong and positive relationships with each other. The correlation coefficients between LEV, ROA, ROI, and BS indicate that they have moderate and positive relationships with each other. The correlation coefficients between LIQ, GENDR, and MEETNG indicate that they have weaker and less significant relationships compared to other variables. Finally, the correlation coefficient between COMSIZE and I_DIR indicates that they have moderate and positive relationships with each other.

This table can be used to analyze the relationships between specific variables, and it is important to understand how these relationships can affect the performance of a company operating in a particular industry. However, while correlation coefficients indicate a relationship, they do not indicate causality, and therefore, they should only be used to understand the relationship.

The results of the panel regression analysis for the included variables are displayed in the

Table 5. Panel regression analysis results.

	ROI	ROA	ROE	LEV	LIQ
BS	0.0017	0.034	−0.105	0.005	0.005
	(0.001)	(0.003)	(0.120)	(0.004)	(0.007)
IDIR	−0.237	−0.474	−1.319	0.824	3.304
	(0.044)	(0.087)	(1.024)	(0.207)	(0.815)
DUAL	−0.032	−0.065	−0.759	0.100	−0.152
	(0.014)	(0.030)	(0.290)	(0.048)	(0.160)
GENDR	0.0218	0.043	0.058	0.014	−0.002
	(0.005)	(0.011)	(0.042)	(0.005)	(0.053)
MEETNG	0.001	0.002	0.017	0.003	−0.003
	(0.003)	(0.007)	(0.010)	(0.007)	(0.001)
COMSIZE	0.017	0.0347	0.093	−0.003	−0.302
	(0.003)	(0.006)	(0.031)	(0.015)	(0.068)
C	0.043	−0.086	0.086	0.223	0.312
	(0.024)	(0.049)	(0.067)	(0.086)	(0.176)
F (6,26)	155.77	155.77	5.94	520.39	577.24
	(0.000)	(0.000)	(0.005)	0.0000	0.0000
R-Squared	0.1507	0.1507	0.0076	0.0926	0.0773
Number of obs	131	131	131	131	131

Source: Author’s own calculations, p < 0.05.

below.

Panel regression analysis is used to analyze panel data using multiple observation periods (time series) and multiple units (such as companies, countries, etc.) [34]. This analysis is typically used to control for the effect of a variable that changes over time.

In panel regression analysis, panel data are merged to create a single dataset and then a regression model is applied. This model attempts to explain how the dependent variable is related to the independent variables. The dependent variables in this case are ROI, ROA, ROE, LEV, and LIQ. The independent variables are IDIR, DUAL, GENDR, MEETNG, and COMSIZE.

The results of the panel regression analysis indicate that Board Size has a statistically significant positive effect on ROI and ROA, but no statistically significant effect on ROE, LEV, and LIQ. An increase of one unit in Board Size is expected to result in an increase of 0.0017 in ROI and 0.034 in ROA. The IDIR indicator has a significant effect on all financial indicators except for ROE. However, a negative significant relationship is observed with ROI and ROA, and a positive significant relationship is observed with LEV and LIQ. The negative impact of the IDIR indicator on profitability is contrary to our initial expectations and requires further investigation. The DUAL indicator also has a significant effect on all indicators except for LIQ. Negative significant relationships are observed with ROI, ROA, and ROE, and a positive significant relationship is observed with LEV, which can be explained by agency theory. Having CEO and Chairman titles for the same person may result in a financing preference that is against auto-finance and in favor of shareholders, which needs to be further examined. The GENDR indicator has a statistically significant positive effect on ROI, ROA, and LEV, but no statistically significant effect on ROE and LIQ. The MEETNG indicator has only a statistically significant negative effect on LIQ. The COMSIZE indicator has a positive and statistically significant effect on all financial indicators except for LEV.

4. Discussion

Due to the use of different methodologies and datasets in each study, the results may vary slightly. Some studies find a strong relationship between corporate governance quality and financial performance, while others show that the relationship is weaker. Additionally, the results of some studies may only be applicable to certain countries, while others may provide a global perspective based on a wider sample.

Therefore, in order to properly interpret the results of studies examining the impact of corporate governance on financial performance, factors such as methodologies, datasets, and sample selection need to be taken into account.

As a result, the findings of research in the literature generally show that good corporate governance practices have a positive impact on financial performance. Therefore, it can be concluded that companies can increase their financial performance and gain the trust of investors by assigning more importance to corporate governance practices.

The original contribution of the study is to examine in more detail and comprehensively the impact of corporate governance on companies’ sustainable financing performance. Specifically, it evaluates how corporate governance affects the outcomes of sustainable financing as one of the sub-dimensions of financial performance.

5. Conclusions

Corporate governance is the effective implementation of management, control, and monitoring mechanisms in a business. Sustainable finance, on the other hand, aims to support long-term financial performance by considering both financial and environmental, social, and governance (ESG) factors. The combination of corporate governance and sustainable finance can enable businesses to be successful both financially and sustainably.

The integration of corporate governance principles with sustainable finance requires businesses to focus more on risk management, transparency, accountability, and ethical values. This approach means measuring and evaluating financial performance not only based on short-term gains but also based on long-term sustainability.

Corporate governance principles can help businesses to be more effectively managed and use financial resources more efficiently. A good understanding of corporate governance can increase transparency and accountability, thereby increasing the trust of investors and other stakeholders in the business. This can enable businesses to benefit more from capital markets and obtain long-term sustainable financing sources more easily.

In conclusion, the integration of corporate governance principles with sustainable finance can enable businesses to be successful both financially and sustainably. Corporate governance principles can also support businesses’ long-term sustainability goals by improving their financial performance. This approach can contribute to creating more trust and sustainability across investors, stakeholders, and society as a whole.

This study examines how corporate governance performance indicators affect companies’ long-term financial performance. Based on the findings of this study, it can be concluded that corporate governance indicators have a significant impact on the financial performance of companies operating in the energy sector sub-market of BIST. Specifically, Board Size, IDIR, DUAL, GENDR, MEETNG, and COMSIZE indicators have been found to have varying degrees of impact on financial indicators such as ROI, ROA, ROE, LEV, and LIQ.

The results suggest that companies with larger boards of directors tend to have higher ROI and ROA, indicating that a more diverse and experienced board can contribute to better financial performance. On the other hand, having CEO and Chairman titles for the same person may lead to a financing preference that is not in the best interest of the company’s financial health.

It is also worth noting that the impact of the IDIR indicator on profitability is contrary to initial expectations, which requires further investigation. In addition, the MEETNG indicator has a negative effect on liquidity, suggesting that excessive board meetings may result in inefficiencies and reduced liquidity.

Overall, the findings of this study provide valuable insights into the relationship between corporate governance and financial performance in the energy sector sub-market of BIST. These results can help companies operating in this market improve their corporate governance practices and ultimately enhance their financial performance, which is crucial for the sustainability of their operations.