THE EFFECT OF CORPORATE GOVERNANCE REGULATIONS IN STOCK MARKETS ON BOARD AND CAPITAL STRUCTURES OF COMPANIES: AN APPLICATION ON BORSA ISTANBUL

Year 2019, Volume: 6 Issue: 3, 142 - 158, 30.09.2019

Cuneyd Ebrar Levent

https://doi.org/10.17261/Pressacademia.2019.1113

Abstract

Purpose- Regulators seek to intervene directly or indirectly in the management styles and financial structures of companies in order to ensure the transparent and efficient functioning of the market, as well as to protect investors. The aim of the study is to determine the effect of corporate governance regulations in stock markets on board and capital structures of the industrial companies listed on Borsa Istanbul (BIST).

Methodology- The study covers the period 2010-2014, including the period during which policy changes took place in Turkey. The sample consists of 134 companies listed in BIST Industry Index and traded continuously during this period. Non-parametric statistical tests are used for the effect of regulations on management structure, while the effect on capital structure is analyzed by panel regression analysis.

Findings- The results show that the regulations have a significant effect on establishment of an internal audit system, the inclusion of independent directors on board and board size. However, there is no statistically significant effect of the regulations on capital structures (leverage) on both pooled model and fixed effect models.

Conclusion- The evidence presented in the study suggests the necessity of the regulations and enforcements for public companies in the field of corporate governance. The results of the study are expected to shed light on not only researchers but also policy makers and regulatory bodies.

Keywords

Financial markets, financing policy, corporate governance, regulations, board size

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