THE RELATIONSHIP BETWEEN TOCK RETURN ASYMMETRIES AND CORPORATE GOVERNANCE: AN EMPIRICAL WORK ON THE TURKISH CASE

Abstract

In this paper, we investigate the relationship between stock return asymmetries, i.e. stock market return volatility and corporate governance by using the data of selected companies listed on Istanbul Stock Exchange (ISE) and we test the hypothesis whether there is a correlation between the quality of corporate governance, concentration of ownership and the positive skewness of ISE listed company returns. We discuss our findings that positive skewness is most profound in stock market returns for companies that have poor corporate governance. In addition, companies with more concentrated ownership also have greater positive skewness. That is, if a company’s ownership is more concentrated, it is more likely that managers have more discretionary power to disclose information, which induces more positive skewness. We find that our results are consistent with some of theoretical models in the literature and also our results are robust to different measures of return asymmetries and to alternative measures of corporate governance.