Analyzing the Impact of ESG Scores on Financial Performance Using CCEP Estimation: Evidence from Borsa Istanbul

Tellioğlu, Tülay; Demirhan, Banu

doi:10.2478/sbe-2025-0054

Abstract

This study examines the impact of Environmental, Social, and Governance (ESG) practices on firm-level financial performance. Using panel data from selected firms listed on Borsa Istanbul over the period 2004Q1–2024Q2, the analysis employs the Common Correlated Effects Pooled (CCEP) estimator, which accounts for both heterogeneity and cross-sectional dependence. Empirical findings reveal that ESG scores exert no statistically significant influence on financial performance when measured by ROA, yet demonstrate a marginally positive association with Tobin’s Q. Conversely, firm size is found to have a weak but statistically significant positive effect on ROA. These results imply that ESG practices may not translate into accounting-based profitability gains, while they appear to provide limited support for market-based performance, thereby underscoring the nuanced and context-dependent role of ESG in corporate financial outcomes.

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Analyzing the Impact of ESG Scores on Financial Performance Using CCEP Estimation: Evidence from Borsa Istanbul

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