Value Relevance of Accounting Data in an Emerging Market: Did Accounting Reforms Make a Difference?

This study investigates the association of accounting earnings (NI) and book value of equity (BV) with stock prices in Istanbul Stock Exchange (ISE), currently Borsa Istanbul (BIST), during the 1992–2006 period. We also explore the effect of accounting reforms on value relevance that is measured as the strength of the association between a firm’s NI and BV and its market value. We specifically investigate the impact of the Turkish Uniform Chart of Accounts (1994), mandatory inflation accounting, consolidations and voluntary (2003–2004), and the mandatory (2005) adoption of International Financial Reporting Standards (IFRS). We hypothesize that these reforms have reduced information asymmetry and thus are expected to enhance the value relevance of accounting information. We find strong evidence that the Ohlson model is a valid model, and BV is more value relevant than NI in BIST. We also find that inflation accounting and consolidations have enhanced the value relevance of BV, while IFRS has increased the value relevance of NI, but reduced that of BV. We contribute to the debate by exploiting the unique sequence of reforms, to come up with comparative value relevance testing designs and interesting results for all major reforms, which we believe will be instructive for researchers and for all emerging and developed economies undergoing similar reforms and best practices

The impact of board diversity on boards' monitoring intensity and firm performance: evidence from the Istanbul stock exchange

The main objective of this paper is to investigate the impact of board diversity on the financial performance of the ISE-100 index firms traded in the Istanbul Stock Exchange (ISE). We use gender and generation differences as observable attributes and directors’ educational and nationality backgrounds as proxies of non-observable attributes of values, beliefs, skills and competencies. We combine these different diversity indicators with "independence" through a diversity index, to account for the critical mass of diverse opinions needed for critical inquiry. We use market-to-book ratio and Tobin’s Q as our market based and return on equity as our accounting based measures of performance. Second, to understand the process by which board diversity affects firm performance, we focus on the relationship between board diversity and the board’s monitoring intensity, on the one hand, and monitoring intensity and firm performance, on the other. We define a board’s monitoring intensity as a composite mediating variable consisting of the number of board meetings, the number of board committees, auditing and financial reporting quality of the firm and its disclosure intensity. We find a positive relationship between board diversity and performance and board diversity and board monitoring intensity. Furthermore, not only does monitoring intensity impact performance, but it also decreases the explanatory power of most of our board diversity measures when it enters the model in the diversity-performance estimations. Overall, our results suggest that diverse boards are better monitors, mitigating agency conflict and enhancing firm performance. We expect that the findings would be of interest for researchers, investors, shareholders, boards, and regulators

How board diversity affects firm performance in emerging markets: evidence on channels in controlled firms

ABSTRACT Manuscript Type: Empirical Research Question/Issue: We investigate the indirect effect of board’s demographic diversity on firm performance via board monitoring in a context where boards are relatively homogenous with respect to structural diversity, using data from Turkey. We contextualize our investigation by exploring the influence of ownership configurations on the effect of diversity. Research Findings/Insights: We find a positive and non-linear relationship between demographic diversity and performance, mediated by the board’s monitoring efforts. The effect of monitoring is found to be contingent upon (moderated by) the controlling shareholders’ propensity to expropriate, measured by the deviation of control rights from cash flow rights, i.e. the wedge. We report that demographic diversity enhances firm performance by mitigating the negative effect of wedge on board monitoring. Theoretical/Academic Implications: Our results provide empirical support for the importance of contextual factors in the relationship between diversity and performance. Our framework and t confound diversity and board-monitoring indices we constructed may prove useful to researchers. Practitioner/Policy Implications: Regulators can use our findings in formulating recommendations or regulations related to desirable characteristics of boards. Our results are also instructive for investors and proxy advisors and indicate that the mere existence of monitoring vehicles may be insufficient to prevent expropriation by dominant shareholders, but diverse boards may mitigate the propensity to expropriate. Board members and shareholders should also benefit from the findings in creating boards that are more diligent monitors

Technology investments, performance and the effects of size and region in Turkish hospitals

This study investigates the effects of technology investments on cost and quality performance and whether hospital size and region have a moderating effect on this relationship. The results are based on responses from 798 managers surveyed in 390 hospitals throughout Turkey. The findings reveal that information/office and clinical technologies have a statistically significant effect on a hospital's cost and quality performance. Furthermore, hospital size has a robust and statistically significant positive (negative) effect on the clinical technology-performance (info/office technology-performance) relationship. Finally, although being located in a developed region enhances hospital performance, it does not have a moderating effect on the technology-performance relationship