Causality between Corporate Governance and Firm Performance:Evidence from Borsa Istanbul (BIST)

Abstract

Due to increasing pace of globalization and recent corporate scandals, corporate governance arrangements have attracted attention and become an area of discussion. Besides securing interests of shareholders, it is also proposed that corporate governance practices enhance shareholders' value. Based on a data set from Borsa Istanbul (BIST) and associated BIST Corporate Governance Index for the period between 2007 and 2015, this study attempts to evaluate whether market and operating performances of firms are affected from the level of adopted corporate governance practices. The study also addresses the issue of causality through systems equations constructed with selected instrumental variables. The findings revealed that corporate governance rating positively influenced stock market performance which was measured by Tobin's Q, and operating performance which was measured by return on assets. The study also found that the corporate governance sub-provisions of shareholders, public disclosure/ transparency and stakeholders had positive impact on market performance, while board structure was irrelevant.

Impact of CEO attributes on corporate reputation, financial performance, and corporate sustainable growth: evidence from India

“…Therefore, to respond to these endogeneity issues, in line with prior empirical research, a set of alternative model specifications, viz. 2SLS model (see Ain et al 2021;Malik et al 2021;Andries et al 2020;Smirnova and Zavertiaeva 2017;Bhatt and Bhattacharya 2015), 3SLS model (Shi et al 2021;Ataünal and Aybars 2017;Lee et al 2016;Bhatt and Bhattacharya 2015;Franken and Cook 2013;Black et al 2006), and twostage dynamic system-GMM model (see Kong et al 2020;Arora and Sharma 2016;Farag and Mallin 2016;Wintoki et al 2012;Schultz et al 2010) have been adopted. These models, as argued, allow finer control over the instrumental variables and can yield more efficient estimators (Lee et al 2016;Schultz et al 2010;Roodman 2009).…”