Do the Depository Banks in Borsa Istanbul Corporate Governance Index Have Better Market Performance Following Their Entry to the Index?

Abstract

The aim of the paper is to examine whether market performances of the depository banks in Borsa Istanbul Corporate Governance Index (BIST XKURY) have changed following their entry to the Index.  Mann Whitney U tests on quarterly data, from the third quarter of 2007 to the third quarter of 2013, of five incumbent banks in the Index reveal that with the exception of two largest banks, market values of the banks and overall sample have not changed in the indexed period.  With the exception of one bank, however, market to book values of all banks and overall sample have declined in the period. There is no change in the price to earnings ratio for overall sample. The findings indicate that owners’ equity values of the banks have improved, however, those improvements have not fully been reflected as due increase on the market prices.  The widespread observation of banking panics around the globe that intensified around 2010s might be a reason leading investors to display cautious attitude in pricing betterments on balance sheets.

Keywords: Borsa Istanbul, Corporate Governance Index, Banking Sector, Market Based Ratios, Mann Whitney U Test.