Shareholder Activism: Telecommunication Industry In Turkey

Year 2017, Volume: 39 Issue: 1, 101 - 116, 19.07.2017

Emre Ergin , İlkay Ejder Erturan

https://doi.org/10.14780/muiibd.329905

Abstract

Shareholders began to play an active role in diminishing the growing agency costs due to recent

financial crisis, poor corporate governance and excessive executive compensations. They act as

individual and corporate forms in order to protect their investment and increase firm value.

Nowadays, social activities of the past have changed to replace the general manager, overcome the

duality problem, elect a board member other than the management candidates, vote for acquisition

or sale decisions, and dividend distribution. The ownership structure in Turkey is generally composed

of families or individuals who do not act aggressively as the hedge funds in USA. The sales of Turkish

companies’ shares to foreign shareholders, introduction of international investment funds in the local

market, and electronic general meeting system introduced a few years ago contribute to shareholder

activism in Turkey. Shareholder struggles are witnessed only in the Turkish stock market which is

quoted in the NYSE. In this study, the two publicly traded companies in the telecommunication

sector, namely Türk Telekom and Turkcell, are examined in terms of their financial situation, the

acceptance rate of the propositions of the management in the general meetings, and the behavior

of their share prices. Shareholder activism is not seen in the Telekom, whereas there have been

trials and regulation changes for Turkcell. In terms of accounting-based data, Türk Telekom has a

lower operational profitability and current ratio as compared to Turkcell. It is concluded that the

level of shareholder activism occurred in the general meetings does not affect the share prices. Both

companies’ shares moved in high correlation during the last three years. The share prices did not show

abnormal patterns during the days following the general meetings. The reasons might be the growth

of the telecommunication industry being above the national growth rate and the positive evaluations

of the shareholders’ decisions by the investors for the future of the firm.

Keywords

Shareholder Activism, Agency Theory, Telecommunication, Turkey

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