The Effect of Directors' Index on Firm Performance: An Evidence from BIST100 Firms

This study investigates the relation between corporate governance quality and firm performance of firms listed in Borsa Istanbul 100 index (BIST100). With accepting corporate governance as a mechanism to reduce the agency conflicts between managers and shareholders, we assume that this reduction results with increased firm performance. We differentiate this study from the existing literature by accepting directors' index (D-INDEX) as a proxy for corporate governance quality for the companies existed in BIST100. We follow Bushee et al. (2010) to create D-INDEX. Our findings indicate that D-INDEX does not have any effect on corporate performance of BIST100 firms. As a second step, we examine the relation between firm performance and D-INDEX for each industry in our dataset. We find that among the firms in electricity industry those have high level of corporate governance quality have high level of firm performance. We explain this result with the quick adjustments of these firms to the changes in corporate governance.