The Effect of Corporate Governance on Firm Market Value and Profitability: Time-Series Evidence from Turkey

45 Pages Posted: 15 Sep 2016 Last revised: 18 May 2018

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: September 15, 2016

Abstract

We study the corporate governance practices of Turkish public 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. TCGI predicts higher market value (with firm fixed effects) and higher firm-level profitability with firm random effects. The principal subindex which predicts higher market value and profitability, and drives the results for TCGI as a whole, is disclosure subindex. We also study the determinants of firms' governance and find that most firm-specific factors have little effect on firms’ governance choices.

In a related project, The Effect of Business Group Governance on Group Market Value and Profitability: Time-Series Evidence from Turkey, http://ssrn.com/abstract=2277768, we study the effect of business group-level corporate governance on group level market value and profitability.

Keywords: Turkey, corporate governance, governance index

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

Suggested Citation

Ararat, Melsa and Black, Bernard S. and Yurtoglu, B. Burcin, The Effect of Corporate Governance on Firm Market Value and Profitability: Time-Series Evidence from Turkey (September 15, 2016). Emerging Markets Review, Vol. 30, 2017; ECGI - Finance Working Paper, 2013; Northwestern Law & Econ Research Paper No. 13-19. Available at SSRN: https://ssrn.com/abstract=2703715 or http://dx.doi.org/10.2139/ssrn.2703715

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

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 (Contact Author)

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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