Corporate Governance, Business Groups, and Market Value: Time-Series Evidence from Turkey

49 Pages Posted: 12 Jun 2014

See all articles by Melsa Ararat

Melsa Ararat

Sabanci University - School of Management, Corporate Governance Forum

Bernard S. Black

Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Date Written: June 11, 2014

Abstract

Business groups play a large, sometimes dominant economic role in many countries. A number of studies find an association between firm-level corporate governance and market value, but none study the role of business group identity in firm level corporate governance or the value of “group governance.” We begin to fill that gap through a case study of Turkey. We study the corporate governance practices of Turkish business groups and listed firms from 2006 to 2012, relying on hand-collected data covering the vast majority of listed firms. We build a Turkey Corporate Governance Index (TCGI), composed of subindices for board structure, board procedure, disclosure, ownership, and shareholder rights. This index predicts higher market value (proxied by Tobin’s q) at both the firm level (with firm fixed effects) and group level (with group fixed effects); the principal driver of this result is disclosure subindex. We find large differences in the governance choices of different business groups. Some groups invest in governance; others do not; and investors reward those that do with higher market values for group firms.

Keywords: Turkey, corporate governance, governance index, business groups

JEL Classification: G18, G30, G34, G39, K22, K29

Suggested Citation

Ararat, Melsa and Black, Bernard S. and Yurtoglu, B. Burcin, Corporate Governance, Business Groups, and Market Value: Time-Series Evidence from Turkey (June 11, 2014). Northwestern Law & Econ Research Paper No. 13-19; ECGI - Finance Working Paper. Available at SSRN: https://ssrn.com/abstract=2277768 or http://dx.doi.org/10.2139/ssrn.2277768

Melsa Ararat

Sabanci University - School of Management, Corporate Governance Forum ( email )

Orhanli Tuzla
Istanbul, Orhanli, Tuzla 34956
Turkey
+90-2164839710 (Phone)
+90-2164839715 (Fax)

HOME PAGE: http://www.sabanciuniv.edu

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)

Brussels
Belgium

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management ( email )

Chair of Corporate Finance
Burgplatz 2
Vallendar, 56179
Germany
+49 261 6509-721 (Phone)
+49 261 6509-729 (Fax)

HOME PAGE: http://www.whu.edu/forschung/fakultaet/finance-group/corporate-finance/

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