Corporate Governance and Stock Returns in Istanbul Stock Exchange
Journal Of Accounting and Finance, vol.11, no.2, pp.128-138, 2011 (Peer-Reviewed Journal)
- Publication Type: Article / Article
- Volume: 11 Issue: 2
- Publication Date: 2011
- Journal Name: Journal Of Accounting and Finance
- Page Numbers: pp.128-138
- Istanbul University Affiliated: Yes
Abstract
This paper investigates whether good corporate governance leads to higher common stock returns in Istanbul Stock Exchange (ISE) or not. We examine the case of Turkish firms using an investment strategy that holds only the firms listed in Extended ISE Corporate Governance Index (CGI) over the period August 2005 – July 2010. In order to adjust for market risk, market model time series regression analysis is conducted. We find that Extended ISE CGI (the portfolio of well-governed firms) underperforms ISE All Index (benchmark portfolio). This result shows that an investor who prefers an investment strategy that holds only the firms listed in ISE CGI over the period August 2005 – July 2010 cannot earn abnormal returns. This is consistent with efficient capital markets hypothesis.