Mehmet Baha Karan

Do Value Stocks Earn Higher Returns than Growth Stocks in an Emerging Market? Evidence from the Istanbul Stock Exchange

We study the comparison of returns between value and growth, and between small and large capitalization portfolios for an emerging market, the Istanbul Stock Exchange (ISE). We show that growth portfolios have superior performance over value portfolios. Thus, our results do not confirm the evidence from most developed and emerging markets. Moreover, inconsistent with the evidence from developed markets, monthly and annually small-large portfolio spreads favour large stocks. These results reflect that the structure of the market and the fundamental of stocks traded in the ISE differ from markets around the world. Time series regression results show that the average returns on value and growth portfolios are not sensitive to market movements. Size and B/M risk factors along with market risk premium produce better descriptions of the returns on value and growth portfolios.

The Development of Energy Markets in Europe

Europe has been engaged in a debate aimed at building an integrated and competitive energy market since the early 1990s. The European Union has instituted to share the responsibility to develop a strategic policy to change current trends, and hence a truly competitive, single European electricity and gas market is expected to open the competition of Europe-wide companies. In this vain, the aim of this chapter is to analyze the developments of European energy markets and regional markets in accordance to the market efficiency criteria and finan- cial aspects of energy. Despite the physical, economic, and political barriers, the number of financial players participating in these markets is continuously increasing and a considerable success has been achieved for efficiency of the markets. However, 10 years after the Lisbon Treaty, the European energy markets are significantly far from the unique energy market goal. Moreover, in Europes energy market there are serious malfunctions causing moves to regional fragmen- tation. Generally, it is agreed that the future structure of the European energy market has not been yet clearly defined.

Credit risks and internationalization of SMEs

The purpose of the paper is to identify common attributable factors causing credit risks to domestic and international SMEs of an emerging market in Turkey. We call domestic firms as the ones only making local sales and international firms as the ones also making sales abroad. Therefore in this study, cross‐border sales are assumed to lead the firms to internationalization. We study totally 1,166 SMEs for the year 2007, which coincide with an economic expansion in Turkey. We find that different factors affect credit risks for the two types of firms. For domestic firms, our results present a direct relationship between the likelihood of corporate default and trade credits, corporate tax, financial expenses and net profit margin yet the relationship turns negative for gross profit margin. For international firms, likelihood of corporate default increases with the ratio of inventories to total assets but decreases with net profits and net sales.

Consumer Credit Risk Characteristics: Understanding Income and Expense Differentials

This study investigates the consumer credit risk characteristics of Turkish households by analyzing factors related to their income and expense differentials. This study assumes that the income and expense patterns are the key elements of consumer credit risk. Based on a data set ranging from 8,551 to 25,566 households, during the period 2003-5, we employ a logistic regression method to model the determinants of income and expense differentials. We first concentrate on the income-expense balance of households to highlight those that are eligible for consumer credit. We reinforce our results by further analyzing the expenditure behaviors of households to find those that should be either primarily eliminated or targeted for consumer credit by financial institutions. Our overall results provide evidence on the factors identifying household income and expense profiles and, hence, consumer credit risk characteristics of Turkish households.

The Drivers of Energy Consumption in Developing Countries

This paper examines the issues associated with the causal relationships between the energy consumption and the factors (rural population, total population, gross domestic product, consumer price index and carbon dioxide emission), with the greatest impact on energy consumption as demonstrated in the literature, for 30 developing countries. Data for the period 1971–2007 are used with a Granger causality test. In the light of obtained findings, the present study reveals common relationships in various directions between energy consumption and the other factors. These results can be explained by factors such as energy markets, resources, population etc. for individual countries. The findings of the study have significant policy implications and are therefore of potential interest to policymakers.

Credit risk estimation using payment history data: a comparative study of Turkish retail stores

Our paper presents a comparative study applying logistic regression and multiple criteria decision analysis tools to the operations of wholesalers to assess the credit risk of their retailers using payment history data and to cluster the risky customers by ranking their risk levels. Our sample comprises approximately 6,000 retailer customers and 600.000 transactions of one of the major wholesalers of Turkey. Our findings emphasize the importance of using payment history and some non-financial factors data for predicting the creditworthiness of a firm.

Quality in the financial sector from the perspective of consumer credits by socioeconomic and demographic characteristics

This study relates to the quality of services in the financial sector by identifying the factors affecting consumer credit risks of households, considering their socioeconomic and demographic characteristics. To do this, we build our analyses on 5120 households from Turkey for the years 2006 and 2007, which coincide with the economic expansion period of the country. We use binary logistic regressions in which the creditworthy households are identified as the ones who did not default in their payments of housing rents or (and) mortgages within the past 12 months. We further make robustness tests by only considering higher income earning households with distorted expenditure behaviours. Overall, our results indicate the consumer credits risk attributes of the households driven by the supply and demand sides of the consumer credits.

How is Moral Hazard Related to Financing R&D and Innovations?

This study investigates which corporate governance and firm-specific characteristics lead firms to be prone to ex-post moral hazard by misallocating the funds that they specifically borrowed for financing their R&D activities. We study 106 firms that received a specially designed loan by a Turkish government to be invested only in R&D and technological innovations. We find that as the size of the loan increases firms are less prone to moral hazard. For family firms our results support the agency theory. For large shareholders, initially our results are aligned with the agency theory but after controlling for the loan size our results hold for the stewardship theory. We also find that as amount of the loans increases relative to size of firms, the performance of projects financed by these loans plummets. Finally, we show that moral hazard related to R&D and innovation activities varies across industries.

Re-examining Turkey’s Potential of Becoming a Natural Gas Transit Hub

The aim of this study is to investigate the potential for Turkey to play a role as a natural gas hub in view of its location adjacent to the most important gas producer and energy consuming countries. In spite of the importance of the location of Turkey for the energy security of the EU, the current gas stream to Turkey and infrastructure are inadequate due to technical, political and economic factors affecting the Southeastern European energy corridor. During the last 15 years, Turkey has achieved considerable reforms in energy markets and complied with all directives of the European Union. However, Turkey still needs to adopt a more transparent framework regarding liberalization of its internal energy market. Our study shows that Turkey should not only improve her market structure, but also continue to develop new projects that will improve her position in the competitive world energy environment. Turkey is in a key location in this international game: in addition to the current BTE pipeline, TANAP is the most promising pipeline passing through Turkey in the east–west energy corridor. A SWOT analysis reveals many factors that favor Turkey as the major European natural gas transit hub. However, many obstacles that may hinder the achievement of its full potential remain.

Introduction: Energy and Finance

Sustainability has become a central issue for firms in the energy industry. These firms have been under increasing pressure to uplift not only their environmental consciousness but also social impact of their actions. One constraint of these firms is prevention of trading off shareholder value maximization with increasing their corporate social responsibility activities geared to the long term benefits of stakeholders. Based on the principles of fairness and equity, Islamic Banking and Finance also provides a vehicle for the firms in the energy industry by incentivizing their corporate social responsibility activities.