Determination of the effect of corporate governance in businesses on financial reporting quality: An application in BIST

In the 21st century, as a result of the scandals in the leading enterprises of international economies, it has created a problem of trust in financial systems. The need to ensure the continuity of the financial system and to restore the reliability of the system has arisen and it has been observed that the importance of corporate governance has increased noticeably. One of the main objectives of corporate governance is to increase financial reporting quality and reliability. In this direction, it has gained importance to investigate the relationship between the corporate governance phenomenon and the quality of financial reporting. The aim of this study is to investigate the effect of corporate governance practices on financial reporting quality with the help of data obtained from financial reports covering the years 2019-2020 of all firms traded in Borsa Istanbul. Beneish Model and descriptive statistical data were used in the study. The Mi score was found through 8 variables in the Beneish Model (1999), and firms that were likely to make fraudulent financial reporting or manipulation were identified. The Zi score was calculated by converting the Mi scores found to a standardized normal variable. In line with the Zi score found, firms that are likely to manipulate were determined, and a descriptive statistical analysis was made for these firms. Independent variables of the study; firm age, period of public offering, whether it is affiliated with a group, number of board members, proportion of independent board members, board ownership and CEO duality. As a result of the analyzes made; It has been found that the probability of manipulation is lower for companies with older years of public offering and operating age than younger companies. Contrary to other studies, it has been observed that the probability of manipulation is higher in businesses that are affiliated with a group. A negative correlation was found between the number of board members and the probability of manipulation. In the independent board member ratio variable; As the number of independent members increased, the probability of manipulation tended to decrease. It has been determined that the number of businesses with CEO duality is higher. It has been determined that the probability of manipulation is higher in businesses with a high rate of board ownership. As a result; it has been observed that fraudulent financial reporting can be made in businesses that do not have strong corporate governance mechanisms, and it can be said that this situation reduces the quality of financial reporting. Keywords: Corporate Governance, Financial Reporting, Financial Reporting Quality, Beneish Model, Fraudulent Financial Reporting.