University of Leicester
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Recognition of Corporate Governance Principles in Turkish Legislation and their Impact on the Influx of Foreign Equity Capital into Turkey

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posted on 2016-01-12, 16:28 authored by Irem Tore
Due to the low domestic savings rate, Turkey is in strong need of foreign capital to finance investment and cover account deficits. However, foreign investors traditionally shy away from companies in which insider control is high. As in the case of many emerging markets, Turkey’s corporate landscape is characterized by a high percentage of family owned companies. Turkey has been classified as an ‘insider system’ in terms of corporate governance, which means that it is shaped by relationships between controlling families and managers. The obscure nature of insider control is a source of concern for foreign investors, as the lack of information and transparency increase the cost of investment. Risk, which affects the potential profit, is one of the main aspects of any decision regarding investment. Therefore, in order to for the Turkish market to gain benefit from the inflow foreign capital, the focus of policy makers should be not only on profitability, but also on transparency and accountability to reduce investment risk. Corporate governance has relatively recently arisen as one of the main factors underlying investment decisions, as it reduces the risk caused by the lack of trust and confidence in the investment environment. However, the level of compliance of Turkish companies with the existing corporate governance standards of Capital Markets Board of Turkey has been quite low. Thus, the new Turkish Commercial Code proposed important reforms towards a corporate governance framework for Turkey. The purpose of this Thesis is to evaluate whether the implementation of the Turkish Commercial Code reforms with regard to corporate governance has had an impact in Turkey’s attempts to attract more foreign equity investors into Turkish Capital Market. The relationship between corporate governance and foreign investment has been studied in other market economies, but studies focusing on Turkish market are rare, and virtually none of them take into account the legal aspects of the problem. Even though there is literature showing an improvement on the corporate governance standards after the new Commercial Code, the effect of corporate governance legislation on foreign investment in Turkey is an issue worthy of further examination. This Thesis contributes to the existing literature by evaluating the effect of corporate governance legislation on attracting foreign investors in the case of Turkey. The findings illustrate that, even though there is still room for improvement, the new regulatory framework has had a positive impact on foreign investors and their perception of the Turkish market.



Vargiu, Paolo; Andreadakis, Stelios

Date of award


Author affiliation

School of Law

Awarding institution

University of Leicester

Qualification level

  • Doctoral

Qualification name

  • PhD



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