Country Analyses, Second Edition
Edited by Christine A. Mallin
Chapter 16: 'Comply or explain' without consequences: the case of Turkey
16 ‘Comply or explain’ without consequences: the case of Turkey Melsa Ararat INTRODUCTION In many developing economies with emerging markets, liberalization efforts overlap with corporate governance reforms to attract international capital to domestic firms. In general, reformers tend to adopt a soft law approach which is characterized by a voluntary corporate governance code and mandatory disclosure of compliance. One apparent aspect of such reforms is the similarity of corporate governance codes adopted by the regulators worldwide. Bebchuk and Hamdani (2009) argue that this similarity is a result of a misguided effort to have global corporate governance standards supported by both international development agencies and the information brokers alike. They posit that neither the academics (Djankov et al., 2008; La Porta et al., 1998) nor the practitioners (for example Institutional Shareholder Services – ISS) pay enough attention to differences in ownership structures and the implications for what ‘good’ governance means. They explain, which is probably known by academics and practitioners familiar with developing economies, that the existence of a controlling shareholder in a firm underpins fundamental differences with respect to the allocation of power, channels for opportunistic behaviour, mechanisms for contesting the power, meaning of independence and the role of the board when compared to firms with dispersed ownership. Based on this argument, the inconclusive outcome of empirical research on the relationship between generally accepted indicators of ‘good’ corporate governance and firm performance can be attributed to the differences in manifestations of the agency problem in dispersed and controlled firms. In this...
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