AN ANALYSIS OF THE RELATIONSHIP BETWEEN THE QUALITY OF CORPORATE GOVERNMENT ACTIVITIES AND THE FINANCIAL PERFORMANCE BY PANEL DATA ANALYSIS UNDER CROSS-SECTIONAL DEPENDENCY: AN INVESTIGATION ON THE COMPANIES LISTED IN THE BORSA ISTANBUL CORPORATE GOVERNANCE INDEX

Year 2020, , 137 - 153, 01.06.2020

Mustafa Özyeşil Havane Tembelo

https://doi.org/10.14514/byk.m.26515393.2020.8/1.137-153

Abstract

In this study, the effects of corporate governance ratings on financial performance are investigated. For this purpose, a sample that include the annual data of the 27 listed companies in the Borsa Istanbul’s Corporate Governance Index for the 2012-2018 a period are used. The existence of cross-sectional dependence among the firms included in the sample is analyzed by Breusch and Pagan (1980) LM test, Pesaran (2004) LM test, Pesaran (2004) CD test and Baltagi, Feng and Kao (2012) LMBC test. According to test results, the cross-sectional dependence between firms is determined. Stationarity level of the series is examined by CADF panel unit root test developed by Pesaran (2007). According to the findings of the test, all series are determined as stationary. The causality relationship between the series are examined by Dumitrescu and Hurlin (2012) method and the causality relations are found from the corporate governance rating of the firms to the operating profits. The coefficients in the econometric model are estimated using Westerlund (2007) OLSAdj method and it is determined that the annual operating profits will increase by 110.74 Million TL when corporate governance quality (ratings) of the firms increase by 1 unit.

Keywords

Corporate Governance, Corporate Governance Ratings, Panel Data Analysis, Panel Unit Root Test, Panel Causality Test

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