Özgür Arslan-Ayaydin

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.

The Impact of Environmental Strengths and Concerns on the Accounting Performance of Firms in the Energy Sector

Energy sector firms are highly affected by the imposition of costs and community attitudes related to their environmental impact. In this chapter, we study the impact of environmental strengths and concerns of firms in the energy sector on their firm performance. We aim to uncover whether positive environmental activities add extra costs or help firms in the energy industry achieve a higher future profitability and compare this impact with firms that do not belong to that industry. Based on the environmental scores compiled by Kinder, Lyndenberg and Domini Research and Analytics, Inc., we show that the environmental concerns of U.S. firms in the energy industry are significantly lower than their environmental strengths and this difference is much larger for energy firms than for firms that do not belong to the energy industry. In addition, we find that only the environmental concerns of energy sector firms have predictive value in terms of future corporate performance that is incremental to a group of earnings-predicting variables. Our results for the energy sector indicate that reducing environmental concerns pays off by improving corporate profitability.

Avoiding Interest-Based Revenues while Constructing Shariah-Compliant Portfolios: False Negatives and False Positives

Shariah law prohibits investments in equities of companies for which interest income is a considerable source of revenue. In practice, this is often enforced by prohibiting investments in firms for which the reported interest-based revenues exceed a predetermined percentage of the firm’s total revenue. In this article, the authors investigate an alternative approach that consists of avoiding firms that are expected to have interest-based revenues exceeding the acceptable threshold over the investment horizon. They compare the traditional backward-looking approach with the proposed forward-looking analysis for a sample of S&P 500 firms over the period 1984–2015. Their results show that the forward-looking approach outperforms the backward-looking approach in terms of both fewer false positives (firms classified as compliant when they are not) and false negatives (firms classified as not compliant when they are).

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.

The Financial Reward for Environmental Performance in the Energy Sector

This article studies the financial reward for environmental performance of firms in the energy sector. Because of their substantial impact on environment, energy sector firms convey a particular status in the environmental–financial performance question, as compared with firms outside this sector. We use the environmental scores compiled by Kinder, Lyndenberg, and Domini Research and Analytics to construct two portfolios that differ in their environmental performance. We find that, between 2000 and 2011, energy sector firms with good environmental performance financially outperform energy sector firms with poor environmental performance. A portfolio strategy with a long (short) position in energy sector firms with good (poor) environmental performance generates an annual abnormal return of 9.624% after correcting for market, size, book-to-market and momentum risks. For firms outside the energy sector, the performance of the two portfolios is statistically insignificant. Using the VIX index, we also show that the market does not reward environmental performance of energy sector firms in periods of high financial uncertainty.

The Dynamics of Crude Oil Spot and Futures Markets

This chapter centers on the question of whether futures markets can be used in the competitive price discovery in crude oil markets. On the one hand, the survey in this chapter uncovers considerable evidence on the theoretical perspective that future prices of crude oil is equal to the spot price of crude oil, plus the cost of carry plus the endogenous convenience yield. On the other hand, through the empirical findings built on the Alquist and Kilian (2010) model, this chapter concurs with the previous studies documenting that futures crude oil prices are uninformative for forecasting spot crude oil prices.

The Crowding-Out Effect of Green Energy Innovation

The U.S. government annually invests

Credit Risk Evaluation of Turkish Households Aftermath the 2008 Financial Crisis

700 million in the research and development of green energy. Yet, the question whether corporate research in green energy leads to increased corporate performance remains unanswered. Based on a sample of 130,000 patents granted by 212 U.S. firms between 1975 and 2006, this chapter tests and compares the impact of green and non-green energy innovation on firms’ financial performance and value. While innovation increases firm performance and value, we find that innovation in green energy has a significant and negative impact on future operating performance and reduces firm value. These results suggest that firms crowd out more profitable non-green projects for green innovation, thereby reducing their value and performance. We further find that investors understand this crowding-out effect of green innovation, as the market reacts negatively around and after the granting date of green energy patents.

Islamic Finance Versus Conventional Finance

The objective of this study is to determine which demographical and financial features affect consumer credits risks of Turkish households aftermath the 2008 global financial crisis. Our analyses are built on the data from Turkish Statistical Institute (TURKSTAT) on an unbalanced panel of 13,979 households between the years 2008 and 2012. We apply our estimations on two stages. First we use logistic regressions to detect which features are likely to lead to default. Second we make robustness test with Survival Cox Analysis and evaluate the impacts of these features again. Our verified results show that the features that affect the default are; household income, volatility of the household income, being a home owner, age, education and gender.