Corporate Governance and Market Value: Evidence from Turkish Banks

Corporate governance is one of the most talked-about topics in business and academic world, and has received considerable attention especially after corporate scandals and crises. Numerous studies have examined the relation between corporate governance practices and firm performance, but mostly in developed markets. Accordingly, this study aims to examine the relation between corporate governance and firm value in an emerging market and assess the corporate governance practices of listed banks in Istanbul Stock Exchange (ISE). Using main measures used in other studies such as ownership, board structure and disclosure practices as corporate governance indicators and ROA and share price for performance, the regression showed that banks with lower governance ratings deliver higher share value due to their higher risk, while banks with higher governance ratings generate lower share value because of their lower risk. The result suggests that stock prices fairly reflect the higher risk of poorly governed firms and lower risk of well-governed firms.