Business

Financial network communities and methodological insights: a case study for Borsa Istanbul Sustainability Index

L. M. Batrancea, Ö. Akgüller, et al.

This study by Larissa M. Batrancea, Ömer Akgüller, Mehmet Ali Balcı, and Anca Nichita explores how Environmental, Social, and Governance (ESG) scores impact business clustering in financial networks. Discover how sustainability plays a pivotal role in shaping cohesive communities among companies, highlighting the significance of ESG factors in the financial market dynamics.

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Abstract

This study investigates the influence of Environmental, Social, and Governance (ESG) scores on the clustering and community formation of companies within various network models. Using daily closing prices of 78 companies in the Borsa Istanbul Sustainability Index, correlation, mutual information, and causality networks were constructed. Community detection revealed that companies within the same sector (particularly financial and manufacturing) form tight-knit communities. Nonparametric tests showed that ESG factors (emission, CSR strategy, innovation, human rights) significantly influenced community formation. Companies with strong emission reduction and CSR strategies formed more cohesive communities, highlighting sustainability's role in shaping financial networks. The findings underscore the critical role of ESG factors in financial market dynamics and promote sustainable investment practices.

Publisher

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS

Published On

Aug 15, 2024

Authors

Larissa M. Batrancea, Ömer Akgüller, Mehmet Ali Balcı, Anca Nichita

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