THE IMPACT OF CORPORATE GOVERNANCE RATINGS ON FINANCIAL PERFORMANCE IN DEVELOPING COUNTRIES: A NEW EVIDENCE FROM TÜRKİYE

Abstract

This study aims to analyze the impact of Corporate Governance Rating (CGR) on the financial performance of companies listed on the Borsa Istanbul Corporate Governance Index (BIST CG Index) in Turkey, which is classified as a developing country. In this study, 16 firms traded in the BIST Corporate Governance Index and having a corporate governance rating (CGR) between 2009 and 2023 are evaluated. Return on Assets (ROA), Return on Equity (ROE), Earnings Per Share (EPS), Earnings Before Interest and Taxes (EBIT) and Financial Leverage (FIN-LEV) Ratios are the dependent variables, while the independent variable is CGR. Correlation and panel Granger causality analyses were applied to the 209 observation values obtained from the data. The results show that there is a statistically significant but negative relationship between CGR and ROA, ROE, EBIT and financial leverage. Panel Granger causality test results indicate the existence of a unidirectional causality relationship from CGR to EPS. There is no causality relationship between CGR and ROA, ROE, EBIT and financial leverage. The results are important as they show that compliance with corporate governance ratings is a cost element for Türkiye. Accordingly, policymakers in Türkiye should provide more support and incentives to businesses in terms of corporate governance practices and make regulations that will remove the negative impact on their financial structures.

Keywords

• Corporate governance
• Financial performance
• Profitability
• Granger Causality
• Developing countries

Project Number

Bulunmamaktadır.

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