Corporate Governance and Firm Profitability: Evidence from Turkey

Companies that are listed in Borsa Istanbul, can be included in the Corporate Governance Index if their corporate governance rating is within the range of 7 to 10. Companies can be rated in accordance with their compliance with the corporate governance principles. The aims of the present study are to investigate (i) the performances of the listed companies in the Corporate Governance Index differ from other companies listed in the Borsa Istanbul-100 Index, and (ii) whether there is a relationship between performance and the value of the corporate governance rating for the companies listed in the Corporate Governance Index Financial ratios were used to calculate the performance of companies. The results showed that the companies that are in the corporate governance index have statistically significantly higher return on assets, net profit margin, and return on equity than the ones that are not indexed. Besides, the companies with higher corporate governance rate, have a statistically significantly higher market book value, and return on equity compared to the ones with lower corporate governance rate. These results may instruct potential/current investors and shareholders. However, there is no found evidence regarding the earnings per share which can affect the investment decision shareholders.