Board structure in listed firms: evidence from an emerging economy

Abstract

Purpose – This paper aims to understand the determinants of board structure of listed firms at institutional, industry and firm levels within an emerging economy. At the institutional level, the paper explores laws, managerial culture and the role of state in instituting and endorsing corporate governance practices. At the firm level, ownership patterns (family and non-family), experience in the capital markets, age and size of the firms are studied to find out the relation between these variables and the board structure. Design/methodology/approach – The research domain of the study is listed firms operating on the Istanbul Stock Exchange. The data for the study are collected at two phases; at the first phase, compliance reports, annual reports, articles of association and annual shareholders’ meeting reports of each firm in the sample are analyzed. At the second stage, secondary data are used for understanding the dynamics of Turkish institutional context. Findings – The results of this study reveal that boards of directors of listed Turkish firms comply with the governance practices instituted by state agencies, except on issues as independent members and committees that will influence the majority owners’ control domain and private benefits. Originality/value – This paper draws attention on institutional context and argues that “good governance” instruments developed for Anglo-Saxon stock market-controlled business systems provide limited explanation for an emerging economy that is characterized by close cooperation between the state, family-owned businesses and financial markets. The study offers insight to policy makers at a national level, interested in developing corporate governance principles regarding boards of directors of listed firms.

Performance sensitivity of executive pay: the role of ownership structure, board leadership structure and board characteristics

“…requirements in terms of the size of the boards: the average number of directors is 8.5 in the Istanbul Stock Exchange's (I.S.E.) 50 index companies in 2010 (Arslantaş & Fındıklı, 2010) and 6 in listed non-financial firms in 2014 (Oba et al, 2014). Board size in Turkey seems to change based on the type of industry and ownership structure as well; for example, Selekler and Yıldırım (2009) found that, in the financial sector, the average number of directors in the boardroom is 8.5, but for the manufacturing and service sectors the number changes to 7.7 and 7.2, respectively.…”

“…mandates that at least one-third of all directors be independent members, a rule that is effective from 2012. Independent members make up 15% of the boardroom in family firms, but 13% for non-family firms, while a large majority of firms in 2010 (74%) did not have any independent directors on their boards (Oba et al, 2014). However, recent studies of listed companies have stated that the ratio of independent directors is progressing and had reached 28.8% by 2015 (Ararat, Alkan, & Aytekin, 2016).…”

“…There is a lack of dual organic structures of internal corporate governance. On the other hand, volatile and unreliable financial and capital markets, insufficient liquidity to provide external control and weak legal protection for minority shareholders shapes the external corporate governance environment in Turkey (Nilsson, 2007;Oba, Tiğrel, & Şener, 2014;Yamak & Ertuna, 2017).…”

Board Structure and Firm Performance: Evidence from State Owned Enterprises in Kenya

“…The findings from both developed and developing economies were mixed and inconclusive. Based on previous studies board Size was operationalized as the total numbers of board membership (Saha & Kabra, 2019;Oba, Tigrel, & Sener, 2014).…”

CEO outsiderness and firm performance in an emerging economy: The moderating role of managerial discretion

“…Turkey has a peculiar corporate governance system compared with its European and North American counterparts. Volatile and unreliable financial and capital markets, insufficient liquidity to provide external control, and weak legal protection for minority shareholders shapes external corporate governance environment in Turkey (Nilsson, 2007;Oba, Tiğrel, & Şener, 2014;Yamak & Ertuna, 2017). On the other hand, internal governance system in Turkey features the main characteristics of family-based systems.…”