A research on the effects of corporate governance practices on companies' cost of capital: A case for Borsa İstanbul

The underlying resason for the striking collapse of global companies is their management's attitude to administer those companies based on their personal interest, as opposed to the shareholders' interests. The lack of sufficient instruments on the part of the shareholders as well as other stakeholders to prevent the managements from such adverse behaviour has prepared the ground for the said collapse. The term corporate governance, which has been envisaged as a result of the efforts to eliminate such adversities, aims to ensure that companies are managed in such a way to provide maximum benefit to their shareholders and stakeholders. Corporate Governance, which is considered as a suitable instrument to minimize agency problems by preventing additional costs stemming from delegation of powers, is a frequently discussed concept. Corporate governance practices are significant for the companies in both developed and developing markets in attaining stable and low-cost finance. The aim of this study is to investigate whether corporate governance practices have an impact on the companies' cost of capital in Turkey. In this context, based on the data of companies having corporate governance ratings in Borsa Istanbul between 2009 and 2015, the relationship between the quality of Corporate Governance practices and debt and cost of equity was analyzed through static and dynamic panel data analysis method. The results suggest that as the corporate governance quality increases, the cost of debt and equity diminishes. Keywords: Corporate governance, corporate governance rating, cost of debt, cost of equity, cost of capital