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Different Approaches to Differentiating 'Better Governed' Companies - Market Segmentation in BOVESPA and Rating Based Indexing in ISE

42 Pages Posted: 30 May 2007  

Melsa Ararat

Sabanci University - School of Management, Corporate Governance Forum

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Date Written: May 2007

Abstract

We compare the objectives, processes and outcomes of different approaches adopted by BOVESPA and ISE (Istanbul Stock Exchange) for differentiating better governed firms listed on their respective boards. Novo Mercado of BOVESPA, launched at the end of December 2000, was able to attract over 30 companies within 5 years, whereas ISE CG Index, announced in February 2005, is not yet launched due to lack of interest from the issuers. We review the CG framework of Brazil and Turkey prior to corporate governance reforms which took place during 2000-2005, pointing out overwhelming similarities between the two, followed by a summary of different approaches used in both countries to encourage companies to subscribe to good governance practices voluntarily, including the design of corporate governance indices, and provide an analysis of the outcome. Based on the lessons of Novo Mercado and ISE, we conclude by offering some predictions and recommendations.

Keywords: Corporate governance, Turkey, Brazil, governance reform

JEL Classification: G31, G32, O16

Suggested Citation

Ararat, Melsa and Yurtoglu, B. Burcin, Different Approaches to Differentiating 'Better Governed' Companies - Market Segmentation in BOVESPA and Rating Based Indexing in ISE (May 2007). Available at SSRN: https://ssrn.com/abstract=989806 or http://dx.doi.org/10.2139/ssrn.989806

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

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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