Analyzing the Relationship Between Financial Failure and KPI Score: An Application in the SASB Transportation Sector
Buse ÖktemCompanies can encounter financial difficulties while carrying out their activities due to economic fluctuations and crises. Financial methods have been developed for companies that want to avoid this situation. In addition to the financial reports companies publish forming the basis for identifying financial failure, environmental problems such as climate change and global warming have increased the demand for non-financial reports as well. Thus, sustainability reports are needed in addition to financial reports in order to determine a company’s ecological and environmentoriented problems. Companies use sustainability reports to announce their innovative and environmentalist approaches to stakeholders and related groups, and publishing sustainability reports is thought to allow companies to increase both their customer profiles as well as their reputation. The Sustainability Accounting Standards Board (SASB) acts as a framework with regard to how to convey to stakeholders issues related to sustainability accounting and reporting. SASB is an organization that operates to develop sustainability accounting standardsin 11 sectors and 77 industry branches. The currentstudy hasselected the transportation sector from among those in SASB and has identified sustainability measurement parameters in terms of key performance indicators (KPIs). In order to analyze the relationship between SASB’s KPI scores and the likelihood of financial failure, the study has chosen financial statements as the economic KPI indicator. During the implementation phase, the study reached out to 43 companies in the transportation sector and accessed data from 40 companies. However, one company was not taken into consideration due to having been founded in 2017; thus, the implementation is based on the remaining 39 companies’ five-year financial statements published between 2016-2020. The study also selected dependent and independent variables as indicators of companies’ financial failure and interpreted the results by applying logit and probit models.
Finansal Başarısızlık ve KPI Puanları Arasındaki İlişkinin Analizi: SASB Ulaşım Sektöründe Bir Uygulama
Buse ÖktemŞirketler faaliyetlerini gerçekleştirirken ekonomik dalgalanmalar ve krizler sebebiyle finansal sıkıntılarla karşılaşabilirler. Bu duruma düşmek istemeyen şirketler için finansal yöntemler geliştirilmiştir. Şirketlerin yayınladıkları finansal raporlar finansal başarısızlığın belirlenmesinde temel oluşturmakla birlikte iklim değişikliği, küresel ısınma gibi çevresel sorunlar finansal olmayan raporlara olan talebi arttırmıştır. Böylece finansal raporlara ek olarak ekolojik ve çevre odaklısorunlarının belirlenmesi için sürdürülebilirlik raporlarına ihtiyaç duymuşlardır. Şirketler sürdürülebilirlik raporları sayesinde paydaşlara ve ilgili gruplara yenilikçi ve çevreci yaklaşımlarını paydaşlara açıklamışlardır. Şirketlerin sürdürülebilirlik raporları yayınlaması ile hem müşteri profilini hem de şirketin itibarını arttırdığı düşünülmektedir. Sürdürülebilirlik muhasebesi ve raporlaması ile ilgili konuların paydaşlara aktarılmasında Sürdürülebilirlik Muhasebe Standartları Kurulu (SASB) çatı görevi görmektedir. SASB, 11 sektör ve 77 endüstri dalında sürdürülebilirlik muhasebesi standartları geliştirmek için faaliyet gösteren bir kuruluştur. Çalışmada öncelikle SASB’da yer alan 11 sektörden ulaşım sektörü seçilmiş ve sürdürülebilirlik ölçüm parametreleri (KPI) belirlenmiştir. Ardından, SASB - KPI puanları ile finansal başarısızlık olasılıkları arasındaki ilişkiyi analiz etmek amacıyla, ekonomik KPI göstergesi olarak finansal tablolar seçilmiştir. Uygulama aşamasında ulaşım sektöründe 43 şirket mevcut olup, 40 şirketin verisine ulaşılmıştır. Ancak bir şirket 2017 yılında kurulduğundan değerlendirmeye alınmamış, kalan 39 adet şirketin 2016-2020 yılları arasında yayınladıkları beş yıllık finansal tablolar esas alınmıştır. Şirketlerin finansal başarısızlık göstergesi olarak bağımlı- bağımsız değişkenler seçilmiş, logit ve probit modeller uygulanarak, sonuçlar yorumlanmıştır.
The COVID-19 pandemic has affected the whole world, and the past global crises have caused significant financial effects, leading some companies to financial crises. As a result of these financial crises, companies have developed various models to avoid financial difficulties. A number of financial failure prediction methods have been developed to predict and combat these financial difficulties in a timely and effective manner, and the issue of companies’ ability to overcome financial distress (i.e., to return to a successful position) has become the focus. The models used to estimate financial failure are widely used in accounting and finance research. These models allow company managers to determine whether they are in financial distress, as well as take precautions and direct investors.
Financial reports are taken as a basis in determining companies’ financial positions. However, environmental events such as global warming and climate change have shown the economic perspective to be insufficient at determining the limits on the planet. Sustainable living will become possible by integrating economic and ecological information as a requirement of eco-social transformations. In addition to protecting their financial position, companies need to publish sustainability reports that declare their sensitivity and responsibility to environmental changes, as these reports will reveal the precautions companies need to take against changing environmental conditions, as well as their need to adopt more environmentally friendly approaches from the production stage to the final consumer. In line with this, the need for non-financial reports in addition to financial reports is thought to have led to the emergence of the concept of sustainability reporting.
The study first theoretically explains sustainability accounting, the reporting and measurement parameters, the Sustainability Accounting Standards Board (SASB), the concept of financial failure, and the models used to predict financial failure.
Afterward, the study will begin the implementation phase. The article has selected the transportation sector from among the 11 sectors included in SASB and accessed the data of 40 out of 43 companies in the transportation sector. The analysis is based on the five-year financial reports these companies published between 2016-2020. However, one company was not taken into consideration as it hadn’t been founded until 2017. The study then examined the annual reports of the remaining 39 companies, applying the logit and probit statistical models for estimating financial failure. Financial statements were selected from among the economic key performance indicators (KPIs) in order to analyze the relationship between the companies’ SASB KPI scores and the likelihood of financial failure.
The study has determined the companies that can be included in the scope of financial failure, as well as the dependent and independent variables. The study calculated marginal effects to express the variables’ effects as percentages. According to the dependent variable of suffering losses for two consecutive years, the coefficients for the short-term liabilities / total liabilities (X3) and net profit / total assets (X6) in the logit and probit models were determined to be significant in terms of accounting. According to the dependent variable of which net working capital is negative, the coefficient for (current assets – inventories) / short-term liabilities (X4) in the logit and probit models was seen to be significant in terms of accounting. According to the dependent variable of 10% loss in amount of assets, the coefficient for (current assets – inventories) / short-term liabilities (X4) in the logit and probit models was determined to be significant in terms of accounting. According to the dependent variable of liabilities / assets, the coefficients for short-term liabilities / total liabilities (X3) and net profit / total assets (X6) in the logit and probit models were found to be significant in terms of accounting.
