Cemil Kuzey

Measuring firm performance using financial ratios: A decision tree approach

Determining the firm performance using a set of financial measures/ratios has been an interesting and challenging problem for many researchers and practitioners. Identification of factors (i.e., financial measures/ratios) that can accurately predict the firm performance is of great interest to any decision maker. In this study, we employed a two-step analysis methodology: first, using exploratory factor analysis (EFA) we identified (and validated) underlying dimensions of the financial ratios, followed by using predictive modeling methods to discover the potential relationships between the firm performance and financial ratios. Four popular decision tree algorithms (CHAID, C5.0, QUEST and C&RT) were used to investigate the impact of financial ratios on firm performance. After developing prediction models, information fusion-based sensitivity analyses were performed to measure the relative importance of independent variables. The results showed the CHAID and C5.0 decision tree algorithms produced the best prediction accuracy. Sensitivity analysis results indicated that Earnings Before Tax-to-Equity Ratio and Net Profit Margin are the two most important variables.

The impact of ownership and board structure on Corporate Social Responsibility (CSR) reporting in the Turkish banking industry

Purpose – The aim of this study is twofold. The first is to analyze the nature, extent and trend of corporate social responsibility (CSR) reporting in the Turkish banking industry under five sub-themes, namely, environment, energy, human resources, products and customers and community involvement. The second is to investigate the impact of ownership and board structure on CSR reporting by the banks. Design/methodology/approach – The annual reports of the banks were examined for the period between 2008 and 2012 to analyze the CSR reporting of the banks, using content analysis and panel data analysis. Findings – The results show that CSR reporting of the banks improved during that period of time. The findings of the study also revealed that there is a significant positive effect of size, ownership diffusion, board composition and board diversity on the CSR disclosure of the banks. Originality/value – This study contributes significantly to the existing literature because the banking industry is generally ex...

A comparative analysis of machine learning systems for measuring the impact of knowledge management practices

Knowledge management (KM) has recently emerged as a discrete area in the study of organizations and frequently cited as an antecedent of organizational performance. This study aims at investigating the impact of KM practices on organizational performance of small and medium-sized enterprises (SME) in service industry. Four popular machine learning techniques (i.e., neural networks, support vector machines, decision trees and logistic regression) along with statistical factor analysis (EFA and CFA) are used to developed predictive and explanatory models. The data for this study is obtained from 277 SMEs operating in the service industry within the greater metropolitan area of Istanbul in Turkey. The analyses indicated that there is a strong and positive relationship between the implementation level of KM practices and organizational performance related to KM. The paper summarizes the finding of the study and provides managerial implications to improve the organizational performance of SMEs through effective implementation of KM practices. Highlights? Knowledge management (KM) is an antecedent to organizational performance. ? SMEs need to improve their KM practices to be competitive. ? A survey of 277 SMEs are used in this empirical study. ? Machine learning techniques can be used to identify complex relationships. ? There is a strong relationship between KM practices and organizational performance.

Analyzing initial public offerings' short-term performance using decision trees and SVMs

In this study, we investigated underpricing of Turkish companies in the initial public offerings (IPOs) issued and traded on Borsa Istanbul between 2005 and 2013. The underpricing of stocks in IPOs, or essentially leaving money on the table, is considered as an important, challenging and worthy research topic in literature. Within the proposed framework, the IPO performance in the short run and the factors that affect this short run performance were analyzed. Popular machine learning methods - several decision tree models and support vector machines - were developed to investigate the major factors affecting the short-term performance of initial IPOs. A k-fold cross validation methodology was used to assess and contrast the performance of the predictive models. An information fusion-based sensitivity analysis was performed to combine the values of individual variable importance results into a common representation. The results showed that there was underpricing in the initial public offerings of Turkish companies, although it was not as high as the underpricing determined in developed markets. The market sentiment, the annual sales amounts, the total assets turnover rates, IPO stocks sales methods, the underwriting methods, the offer prices, debt ratio, and number of shares sold were among the most influential factors affecting the short term performance of initial public offerings of Turkish companies. Underpricing of stocks in IPOs is an important and challenging research topic.Decision tree models are shown to be powerful tools to analyze early IPO dynamics.C5.0 algorithm produced significantly better prediction results than CART.An information fusion-based sensitivity analysis was used to identify variable importance.Market sentiment, sales and turnover rates were identified as the most important variables.

Determinants of corporate cash holdings: evidence from the emerging market of Turkey

This study analyses the factors that might explain the level of corporate cash holdings in a broad sample of Turkish-listed nonfinancial firms over the period 1997 to 2011. The empirical results reveal that, on average, Turkish firms hold 9.1% of their total assets as cash and cash equivalents. There is a steadily increasing trend in cash holding across the years. Both the system GMM and the difference GMM regression results are consistent; almost exactly the same variables are significant and going in the same direction. The findings indicate that the previous year’s cash holding is positive and significant determinant at the current year’s cash level, suggesting that these firms have a targeted cash level. Furthermore, the results reveal that cash flow and growth opportunities have positive and significant impact on the cash level. However, the amount of capital expenditures, liquid assets used as cash substitute, the degree of tangibility of assets, financial debt ratio and leverage have negative and significant impact on the cash level. Most of these explanatory variables were in line with our theoretical background and with previous studies as well.

The impact of multinationality on firm value: A comparative analysis of machine learning techniques

In this study, the impact of multinationality (as measured by foreign sales ratio) and fourteen other financial indicators on firm value (characterized by market capitalization and market-to-book ratio) for the period of 1997-2011 was investigated using two popular machine learning techniques: decision trees and artificial neural networks. We divided the time period of 1997-2011 into two periods; 1997-2004 and 2005-2011 to investigate the robustness of results pre- and post-IFRS implementation. To determine the relative importance of factors as the predictors of firm value, first, a number of classification models are developed; then, the information fusion based sensitivity analysis is applied to these classification models to identify the ranked order of the independent variables. Among the independent variables, multinationality was found to determine firm value only moderately. In addition to multinationality, other financial characteristics such as firm size (as measured by natural logarithm of assets), leverage, liquidity, and profitability were consistently found to be affecting firm value.

The effect of board gender diversity on firm performance: evidence from Turkey

Purpose This study aims to include two primary goals. First to determine the board characteristics of listed companies in Turkey and second to investigate the effect of board gender diversity on the performance of these companies. Design/methodology/approach This study uses an instrumental variables regression analysis to investigate the relationship between board gender diversity and firm performance using the data from 2008-2012 of the entities listed on the Borsa Istanbul. Findings The results indicate that the boards of these companies in Turkey are male-dominated. Moreover, this study shows that the inclusion of female directors is positively related to the financial performance of firms, as measured by the return on assets, the return on equity and the return on sales. Originality/value Limited empirical studies have been conducted on the relationship between board gender diversity and firm performance in emerging economies. Therefore, there is still no consensus regarding the link between board gender diversity and firm financial performance based upon the mixed and sometimes contradictory results in prior research. Therefore, this study extends the current literature in the context of Turkey, showing that a female member on the board can enhance the financial performance of a company.

An investigation of antecedents of organizational citizenship behavior in the Turkish hospitality industry: a structural equation approach

Purpose – This paper aims to investigate the relationships between organizational citizenship behavior (OCB) and its antecedents – job satisfaction (JS), affective commitment (AC), organizational justice (OJ) and charismatic leadership (CL); the relationships among its antecedents; and mediating roles of JS and AC in the relationships between CL and OCB and between OJ and OCB in the Turkish hospitality industry in Antalya region. Improving OCB in the hospitality industry, as in other industries, plays an important role in increasing service quality and organization performance. Design/methodology/approach – The sample used for this study consisted of 768 employees working in 18 hotels (4- or 5-Star) in the Antalya region of Turkey. The data collection methodology of the study was a questionnaire survey which was administered through drop-and-collect methodology. The analysis methodology of the study was structural equation modeling. Findings – The findings indicated that both AC and JS mediated the relati...

Influence of theory, seniority, and religiosity on the ethical awareness of accountants

Purpose - – This study aims to investigate the influence of ethical theories, religiosity and seniority on the ethical awareness of accountants. Design/methodology/approach - – The data were collected by using a questionnaire survey completed by 219 accountants located in various locations in Turkey. To investigate the relationship between constructs, the partial least square structural equation model was implemented. Findings - – The findings indicated that seniority in the profession and religiosity have a positive influence on ethical awareness. Within the theoretical approaches, deontology has a positive influence on ethical awareness, whereas egoism has a negative one. Research limitations/implications - – The study has some implications regarding enhancing the ethical awareness of accountants: accountants who are in the early stages of their career development should be made aware of the ethical issues they face in their professional life; accountants should be taught laws and regulations of accountancy profession from the entry level throughout their working life; through professional associations, some initiatives may be taken to involve accountants in social responsibility programs to curb selfish behavior and improve empathy. However, a questionnaire survey does not permit an investigation from a qualitative perspective (the whys and hows of the answers); thus, further case studies might be necessary to make detailed investigations. Originality/value - – This study is unique in that it tries to answer what factors comprehensively influence the ethical awareness of accountants in an emerging market context.

Exploring predictors of internal, external and anonymous whistle-blowing intentions: a quantitative analysis of accounting professionals

Organizational wrongdoing incidences have been widely spread throughout the business world. Accounting professionals are the key human resources who find evidence of wrongdoing in firms and have the opportunity to report it. The purpose of this study is to examine the relationship between the perception by accounting professionals concerning valid predictors for whistle-blowing and their preferences in doing so. Using the survey method, 177 responses were collected from Turkish accounting professionals. A partial least square structural equation model was constructed to test both the reliability and validity of the measurement and the structural model. The results showed that the ‘ethics and professional benefit’ and ‘corporate benefit’ dimensions of whistle-blowing predictors have significant positive impact on ‘internal whistle-blowing’. However, the accountants’ perceptions of ‘fear of retaliation’ and ‘corporate benefit’ as whistle-blowing predictors have positive influence on ‘anonymous whistle-blowing’. Finally, while perception of the accountants about ‘fear of retaliation’ has a positive relationship for deciding to not blow the whistle, the accountant professionals who have more ‘corporate benefit’ whistle-blowing perception have less propensity to not blow the whistle.