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Does Macroeconomic Performance Affect Corporate Governance? Evidence from Turkey

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  • Mehmet Ugur
  • Melsa Ararat

Abstract

Recent work on corporate governance has highlighted the effects of corporate governance quality on macroeconomic crises, especially in the context of South‐East Asian economies. However, the possibility of reverse causation from macroeconomic performance to corporate governance has been overlooked. This paper aims to address this issue by examining the relationship between macroeconomic stabilisation and corporate governance reforms in Turkey since the 1999 and 2001 crises. We demonstrate that the prospect of macroeconomic stability has led to extensive corporate governance reforms for two reasons. First, recent return to macroeconomic stability has been underpinned by public governance reforms, which spilled over to the area of corporate governance. We call this the statutory reform effect. Second, macroeconomic stability tended to have a positive effect on firms’ investment in corporate governance quality. We call this the voluntary reform effect. To substantiate these findings, we examine the post‐1999 developments in the following areas: (i) the effectiveness of regulatory authorities; (ii) disclosure and transparency rules; and (iii) the quality of the enforcement regime.

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  • Mehmet Ugur & Melsa Ararat, 2006. "Does Macroeconomic Performance Affect Corporate Governance? Evidence from Turkey," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(4), pages 325-348, July.
    • Handle: RePEc:bla:corgov:v:14:y:2006:i:4:p:325-348
    DOI: 10.1111/j.1467-8683.2006.00510.x
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    1. Perotti, Enrico & Volpin, Paolo, 2004. "Lobbying on Entry," CEPR Discussion Papers 4519, C.E.P.R. Discussion Papers.
    2. Takalo, Tuomas & Castrén, Olli, 2000. "Capital market development, corporate governance and the credibility of exchange rate pegs," Working Paper Series 34, European Central Bank.
    3. Erik BerglöF, 2005. "What do Firms Disclose and Why? Enforcing Corporate Governance and Transparency in Central and Eastern Europe," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(2), pages 178-197, Summer.
    4. World Bank, 2001. "Turkey - Public Expenditure and Institutional Review : Reforming Budgetary Institutions for Effective Government," World Bank Publications - Reports 15482, The World Bank Group.
    5. Olli Castren & Tuomas Takalo, 2000. "Capital Market Development, Corporate Governance and the Credibility of Exchange Rate Pegs," Econometric Society World Congress 2000 Contributed Papers 0515, Econometric Society.
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    Cited by:

    1. Melsa Ararat & Moataz El-Helaly & Alan Lowe & Nermeen Shehata, 2021. "Contingent Effect of Board Gender Diversity on Performance in Emerging Markets: Evidence from the Egyptian Revolution," JRFM, MDPI, vol. 14(11), pages 1-16, November.
    2. Mohd Nor Zamry, Nur Syafinaz, 2019. "Corporate Governance and Its Determinants: A Study on Wells Fargo Scandal," MPRA Paper 93726, University Library of Munich, Germany.
    3. Ararat, Melsa & Yurtoglu, B. Burcin, 2021. "Female directors, board committees, and firm performance: Time-series evidence from Turkey," Emerging Markets Review, Elsevier, vol. 48(C).
    4. Mertzanis, Charilaos & Marashdeh, Hazem & Houcine, Asma, 2024. "Do financing constraints affect the financial integrity of firms?," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 220-240.
    5. Khoo, Shi Shean, 2019. "Tobin's Q of Honda Motor Company, Limited and its Determinants from 2013 to 2017," MPRA Paper 93879, University Library of Munich, Germany.
    6. Chen, Naiwei & Yu, Min-Teh, 2024. "Less is more: Evidence from firms with low cash and debt," Research in International Business and Finance, Elsevier, vol. 69(C).
    7. Sevin Gurarda & Emre Ozsoz & Abidin Ates, 2016. "Corporate Governance Rating and Ownership Structure in the Case of Turkey," IJFS, MDPI, vol. 4(2), pages 1-16, April.
    8. Canan Yildirim, 2009. "Moral Hazard, Corporate Governance, and Bank Failure: Evidence from The 2000-2001 Turkish Crises," Working Papers 486, Economic Research Forum, revised May 2009.
    9. Ararat, Melsa & Black, Bernard S. & Yurtoglu, B. Burcin, 2017. "The effect of corporate governance on firm value and profitability: Time-series evidence from Turkey," Emerging Markets Review, Elsevier, vol. 30(C), pages 113-132.

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