Does corporate governance certification reduce the cost of debt? Evidence from the Borsa Istanbul corporate governance index

This study examines whether first-time inclusion in the Borsa Istanbul Corporate Governance Index lowers firms’ cost of debt by functioning as an externally assessed and publicly observable governance certification. Using annual data on non-financial Borsa Istanbul firms from 2008 to 2024 and a generalized synthetic control design, the study compares certified firms with credible uncertified counterfactual firms. The results show that newly certified firms experience lower debt costs following certification. The main estimate indicates an average treatment effect of -0.113 for financial expenses scaled by average total debt, suggesting relative debt-cost shielding rather than an unconditional decline in borrowing rates. Placebo tests and pre-treatment diagnostics support the result, while leverage, debt maturity, profitability, and sales growth do not show contemporaneous improvements that would mechanically explain the effect. The findings suggest that creditors value governance certification when it reduces borrower opacity and information risk in an emerging-markets.