Towards a Mandatory Corporate Governance Regime: Empirical Evidence from Turkey

  • Halit Gonenc
  • Yasemin Zengin-KaraibrahimogluEmail author
Part of the Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application book series (AFSGFTA)


This paper aims to understand the effects of the transition from “comply or explain” to a partially mandatory corporate governance regime on the firm value using the recent sequential corporate governance reforms in Turkey. Using a sample of 1,120 Turkish listed firms for the years 2009 to 2014, we document that, in the short term, the initial market reaction to the new corporate governance regime is positive. Our initial results indicate that the induced benefits of the new corporate governance code outweigh the compliance costs imposed by the new code. Furthermore, our results entail that, over the period, there is a shift in the expectations of the market participants toward more the compliance costs. In the long term, we find a significant increase in Tobin’s Q for firms with strong corporate governance in the pre-reform period and subject to greater mandatory provisions in the post-reform period. In corporate governance literature, a central question not yet answered is whether an “Anglo-Saxon”-based corporate governance system is well suited to an emerging market context. Our paper contributes to the debate on the optimal corporate governance regime by documenting additional empirical results to the limited academic studies regarding the value implications of a partially mandatory corporate governance regime in an emerging market. Our results provide useful insights for other capital market regulators in emerging markets to understand possible impacts of such a transition in an emerging market context.


Mandatory provisions Corporate governance reform Market reaction Firm value Emerging market 



We thank Burcin Yurtoglu from WHU-Otto Beisheim School of Management. Melsa Ararat from Sabanci University, Turkey and Corporate Governance Forum of Turkey. Abe de Jong from Erasmus University, Shuxing Yin from Sheffield University, Araceli Mora from University of Valencia and Roberto Di Pietra from University of Siena and participants of the 7th workshop of Accounting and Regulation, 17th Workshop on Corporate Governance and Investment, and 4th Paris Financial Management Conference for their valuable comments and helpful suggestions. We are grateful for research funding from the Corporate Governance Association of Turkey (TKYD). We thank Gokce Erbuga, Mustafa Reha Okur and Burcu Karaöz for their research assistance. An earlier version of this paper was circulated under the title: “Market reactions to mandatory corporate governance provisions: Evidence from Turkey”.


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© Springer Nature Singapore Pte Ltd. 2019

Authors and Affiliations

  1. 1.Department of Economics, Econometrics and Finance, Faculty of Economics and BusinessUniversity of GroningenGroningenThe Netherlands
  2. 2.Department of Accounting, Faculty of Economics and BusinessUniversity of GroningenGroningenThe Netherlands

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