Comparison of the Profitability Performance of BIST Corporate Governance Index Companies in Turkey

Abstract

Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Through appropriate implementation of the principles of corporate governance a company can enhance its financial performance, improve its competitiveness, appreciate its credibility and reputation and increase relations with key stakeholders. Borsa Istanbul (BIST) Corporate Governance Index (XKURY) is composed of listed companies who accomplished a certain level of Corporate Governance Principles. This study investigates the links between profitability performance and good corporate governance practices. It aims to test empirically that if there is a significant difference between the profitability performance of two group of non-financial companies listed in Borsa Istanbul 100 index. Level of performance is assessed by determining the net profit margin, gross profit  margin, return on asset, return on equity, return on sales and return on invested capital for the sample of companies. Data are taken from annual reports of the companies in the 2015 and based on a sample of 25 XKURY companies 47 non-XKURY companies listed in Borsa Istanbul 100 index. As a result, the companies who comply better with the corporate governance principles are found to have better profitability performance against the others. It is observed that good corporate governance practices positively influence the efficiency and financial results of business operations.

Keywords: Corporate Governance Index, Borsa Istanbul, Corporate Profitability, Corporate Governance Practices.