The Effect of Corporate Governance on the Cost of Debt: Evidence from Borsa İstanbul (Kurumsal Yönetimin Borç Maliyetine Etkisi: Borsa İstanbul’da Bir Uygulama)

Gökhan Özer, İlhan Çam and Sedat Çerez
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Gökhan Özer: Gebze Technical University
İlhan Çam: Gebze Technical University
Sedat Çerez: Gebze Technical University

Business and Economics Research Journal, 2023, vol. 14, issue 2, 217-226

Abstract: The quality of corporate governance practices provides assurance that the rights of stakeholders are protected, reduces the costs arising from agency problems and information asymmetry, and strengthens the monitoring and audit functions related to company activities. This paper aimed to investigate whether good corporate governance practices reduce the cost of debt by lowering risk premiums. In this context, the relationship between the corporate governance ratings and borrowing costs of 29 companies traded on the Borsa İstanbul between 2007 and 2019 was investigated. According to the test results of the panel data estimation model, the random effects panel data analysis method was preferred. In the results of the analysis, the coefficient of the cost of debt variable was negative and statistically significant. Accordingly, the increase in the corporate governance rating of the firms has a reducing effect on the cost of debt. As a result, by reducing the cost of debt, investments to strengthen corporate governance can help companies increase their profit margins, increase their financial flexibility by strengthening their cash flows, and have a better financial situation, thus contributing to the long-term growth and sustainability of companies.

Keywords: Corporate Governance; Cost of Debt; Access to Finance; Panel Data Analysis; Borsa İstanbul (search for similar items in EconPapers)
JEL-codes: C23 G32 G34 (search for similar items in EconPapers)
Date: 2023
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