A cross-sectional analysis of corporate governance's effect on financial performance and profitability of the companies in BİST corporate governance index (XKURY)

The aim of this study is to analyze the impact of transition to corporate governance on companies' financial performance and profitability which are included in BİST Corporate Governance Index (XKURY). Measurements were done via financial key performance indicators such as profit margins, return on assets and return on equity; after inclusion year to Corporate Governance Index compared to prior years before being included. In order to clarify the hypothesis generation, firstly the concept of corporate governance was researched which consists of definition and principles of corporate governance. The only criteria within this study to consider a company was being within corporate governance was company being included to Corporate Governance Index of BİST which requires a company to meet certain standards such as Corporate Governance Rating. To link corporate governance to financial performance, certain financial indicators were determined and a cross-sectional analysis of each selected company within these parameters was conducted. Analysis of 38 companies' financials between years of 2005 to 2016 yielded a result that does not concretely support a correlation between corporate governance and financial performance. A key takeaway from this study was a company's financials can be impacted from a large number of events that are not related to corporate governance such as asset increase in large proportions.