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International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
Fragility of Emerging Stock Markets; a Comparison
between B&H, Croatia and Serbia
Adnan Duric
International Burch University, Sarajevo, Bosnia and Herzegovina
duric_adnan@hotmail.com
Uğur Ergun
International Burch University, Sarajevo, Bosnia and Herzegovina
uergun@ibu.edu.ba
This study investigates the how emerging stock markets respond to
external and internal shocks. Daily stock market data from three southeast
emerging European countries are used.
GARCH (1, 1) model is employed. Daily stock markets indices are obtained
from the selected stock markets and data stream for the period January
2000 to December 2011.
Augmented Dicky Fuller unit root test and co-integration test are used to
gauge out linkages between stock markets.
The results of the study can be the useful resource for future research.
Keywords: Fragility, Emerging Stock Markets in Bosnia, Croatia, Serbia.
7
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Fragility of Emerging Stock Markets; a Comparison between B&H, Croatia and Serbia
Author
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DURIC, Adnan
ERGÜN, Uğur
Abstract
A summary of the resource.
This study investigates the how emerging stock markets respond to external and internal shocks. Daily stock market data from three southeast emerging European countries are used. GARCH (1, 1) model is employed. Daily stock markets indices are obtained from the selected stock markets and data stream for the period January 2000 to December 2011. Augmented Dicky Fuller unit root test and co-integration test are used to gauge out linkages between stock markets. The results of the study can be the useful resource for future research. Keywords: Fragility, Emerging Stock Markets in Bosnia, Croatia, Serbia.
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International Burch University
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2013-05-10
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ISSN 2303-4564
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International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Vertical Integration on the Example of Agrokor
Nađa Dreca
International University of Sarajevo
nadja_n88@hotmail.com
Abstract
This study will provide the explanation of the vertical integration, benefits and
show the application of the vertical integration in the real business on the example
of the Croatian company Agrokor. There are always important transactions between
a multinational`s operations in different countries. The output of one subsidiary is
often an input into the production of another. Or technology developed in one
country may be used in others. Or management may usefully coordinate the
activities of plants in several countries. Multinationals exist because it turns out to
be more profitable to carry out these transactions within a firm rather than between
firms. This means that multinationals engaged in internalization. If you want
something done right, do it yourself. Many transactions are more profitably
conducted within a firm rather than between firms. Also many activities in different
countries may be usefully integrated in a single firm. One of example of vertical
integrated firm in Balkan is Agrokor, Croatian company. In 1989 the joint-stock
company Agrokor was registered. The Agrokor Group is the largest private
company in Croatia and one of the leading regional companies Apart from the
Croatian companies, the Agrokor Group today also comprises companies from all
over the region acquired during the last few years: Ledo Čitluk, Sarajevski kiseljak,
Velpro Sarajevo, Frikom, Dijamant, Idea, Ledo Hungary and Fonyodi.
Keywords: Vertical Integration, Multinational Company, Production, Subsidiary,
Profitability,
Outside the firm price movements’ direct production, which is coordinated through a series
of exchange transactions on the market?
Within a firm, these market transactions are eliminated and in place of the complicated
market structure with exchange transaction is substituted the entrepreneur-coordinator,
who directs production. It is clear that these are alternative methods of coordinating
production.
Ronald Coase (1937)
If you want something done right, do it yourself.
He is a slave of the greatest slave, who serves nothing but himself.
Introduction
Today the uncertain business environment cause that many companies due to changes in
the market are forced to introduce some changes its business and size of the company and
corporation in order to gain higher profit, gain competitive advantage and establish stable
operational environment within company. Those goals are mostly achieved throughout the
process of vertical integration. In order to perform efficiently all production channels must
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
be integrated into single line, such as connection of purchase of inputs, production,
business logistics, marketing and sale within own Retail Company.
Vertical integration represents the growth of Retail Company which establishes
connections with its supplier (upward) and consumers (downward) integration in order to
improve its competiveness.
There are always important transactions between a multinational`s operations in different
countries. The output of one subsidiary is often an input into the production of another. Or
technology developed in one country may be used in others. Or management may usefully
coordinate the activities of plants in several countries. Multinationals exist because it turns
out to be more profitable to carry out these transactions within a firm rather than between
firms. This means that multinationals engaged in internalization. (Krugman and Obstfeld,
2009)
Vertical Integration Characteristics
Many transactions are more profitably conducted within a firm rather than between firms.
Also many activities in different countries may be usefully integrated in a single firm.
Vertical integration – is when a firm participates in more than one successive stage of
value chain (supply/production/distribution chain).Only if a firm can perform most of the
necessary production steps less expensively than if it relied on other firms does it vertically
integrated. (Carlton and Perloff, 2005)
First advantage of internalization is technology transfer. Transfer of knowledge or another
form of technology may be easier within a single organization than through a market
transaction between separate organizations.
Second advantage of internalization is vertical integration. If one firm (the `upstream`
firm) produces a good that is used as an input for another firm (the `downstream` firm) ,
many problems can result. They can engage in conflict regarding many things, weak
cooperation, competition etc. These problems may be avoided or at least reduced if these
firms are combined into a single `vertical integrated` firm.
There are at least three possible costs of vertical integration.
First, the cost of supplying its own factors of production or distributing its own product
may be higher for a firm that vertically integrates than for one that depends on competitive
markets, which serve these needs efficiently.
Second, as a firm gets larger, the difficulty and cost of managing it increase. The advantage
of dealing with a competitive market is that someone else supervises production.
Third, the firm may face substantial legal fees to arrange to merge with another firm.
Advantages of vertical integration
1. Internalization
To lower transactions costs – avoid opportunistic behavior
To control quality of products supplied
To enhance coordination – e.g. JIT delivery
To reduce uncertainty regarding prices, availability, etc.
2. Steady supply of key inputs
3. Correct market failure due to externalities by internalizing those externalities
4. Avoidance of government restrictions, regulations, taxes
Combining regulated utilities and unregulated service companies
Using transfer pricing for allocation of profits
5. Gain market power
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
better exploit or to create market power
6. Eliminate market power
A victim of another firm`s market power may vertically integrate to eliminate that
power. (Krugman and Obstfeld, 2009)
Agrokor Example
One of example of vertical integrated firm in Balkan is Agrokor, Croatian company. In
1989 the joint-stock company Agrokor was registered.
By using vertical integration from agriculture to manufacture of end products, Agrokor
provides the customers with a wide range of fresh, healthy domestic products.
Furthermore, the proposed concentration will lead to a vertical integration of production,
retail sale and wholesale, which will undoubtedly produce horizontal effects within the
retail sale and wholesale.
The Agrokor Group is the largest private company in Croatia and one of the leading
regional companies with consolidated total revenues greater than HRK 29bn in 2011 and
employing almost 40,000 people. (Agrokor)
The Agrokor Group's core businesses are the production and distribution of food and
drinks on the one hand and retail on the other, comprising among others Croatia's largest
producers of mineral water - Jamnica d.d.; ice-cream - Ledo d.d.; oil, margarines and
mayonnaise - Zvijezda d.d.; the largest Croatian meat industry - PIK Vrbovec d.d.; Belje,
the largest agricultural and industrial capacity in Croatia and the leading retail chain Konzum d.d.
Since it was established 30 years ago, due to a clear business vision, a consistently applied
strategy and well-considered investments Agrokor has grown from a small family-owned
company for the production and sale of flowers to become the leading food industry and
retail group in the region today (Figure 1).
Figure 1: Agrokor Business
Production and storage of beans, soya and feed
Chicken Meet production, meat and milk products
Salt Production
Production of Edible oil, Margarine and mayonnaise
Ice Cream and Frozen Food Products
Production of Water, Juices and Soft Drinks
Wine Growing and Production
Wholesale and Distribution
Retail
Other Business
Source: Agrokor
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Apart from the Croatian companies, the Agrokor Group today also comprises companies
from all over the region acquired during the last few years: Ledo Čitluk, Sarajevski
kiseljak, Velpro Sarajevo, Frikom, Dijamant, Idea, Ledo Hungary and Fonyodi (Figure 2
and Figure 3).
Figure 2: Agrokor Group Business Structure
Source: Agrokor
Agrofructus d.o.o. is the leading company in the area of South East Europe, specialized in
production, purchase and sale of fruits and vegetables. Annually, they supply 200,000 tons
of products, grown in Croatia, Macedonia, Bosnia and Herzegovina and Serbia to countries
of western and Eastern Europe. With an annual turnover of over € 100 million it represents
a vital part of the Agrokor concern.
Agrokor trgovina d.d. has been operating as an independent company since 1996. The
company's core business activity is trading in agricultural/food products. As part of the
Agrokor Group, Agrokor trgovina participates in cooperation with other members of
Agrokor, namely Belje d.d., PIK Vinkovci d.d., Vupik d.d. and Zvijezda d.d., in the
production and processing of agricultural products.
Agrolaguna d.d. has been part of Agrokor since the end of 2004. It belongs to the business
segment engaged in the production of domestic high-quality products. Agrolaguna's
business operations are divided in several production segments: vine-growing, olivegrowing, and stock-breeding and, to a lesser extent, vegetable-farming. All the company's
products are regionally known for their quality and production tradition
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Agroprerada is engaged in desiccation and storing of cereals and oil crops, production of
fodder, production, storing and packing of table apples. Since Agroprerada joined Agrokor
its total turnover has linearly been increasing from year to year. The production of fodder
is a dominating business activity of Agroprerada.
PIK Vinkovci d.d. produces and sells agricultural products of plant and animal origin and
owns the biggest silo capacities in the eastern part of Croatia, which is where the main part
of Croatia's agricultural production is based.
PIK Vrbovec is one of the largest Croatian meat processing industries with the 70 years old
tradition in the production and processing of meat products. It has been a part of the
Agrokor Corporation, its majority owner, since 2005.
Sojara Zadar as the only producer in the region with processing units able to process
soybean into soybean meal, raw soybean oil and lecithin has no significant competitors in
either Central or Eastern Europe. The processing capacity is 1,000 tons of soybeans a day
or 300,000 tons a year.
Belje d.d., once the largest domestic agro-industrial conglomerate with the 300 years old
tradition of food production, has been a part of the Agrokor Group since the beginning of
2005, which is the largest food producer in this part of Europe. Belje d.d. has been
engaged in food production for over three centuries now, and it has been part of the
Agrokor Concern, the largest food producer in this part of Europe, since 2005Food
processing and agricultural production are the parts of Belje, divided into profit centres:
production of smoked sausages and bacon, production of flour, vine production and
bottling, production of dairy products, agriculture, seed growing, fodder factory, pig
breeding, bullocks breeding and dairy cattle-raising.
Jamnica d.d. is the largest mineral water producer in Croatia with a tradition of more than
175 years. Since 1999, apart from mineral waters Jamnica is also producing fruit juices
under the Juicy brand, and in 2002 it launched Jana natural spring water and Juicy Fruits
refreshing soft drinks. Jamnica d.d. comprises the Jamnica natural mineral water bottling
plant in Pisarovina, the Jana spring water and non-alcoholic beverage bottling plant in
Sveta Jana, the Juicy natural fruit juices bottling plant, the Sarajevski kiseljak natural
mineral water and non-alcoholic beverage bottling plant in Bosnia and Herzegovina, the
Fonyódi mineral water bottling plant in Hungary, and distribution companies in Slovenia,
Serbia and the USA.
In 2000 the first major step towards other regional markets was made - in Bosnia
Herzegovina Jamnica became the majority shareholder of the natural mineral waters and
soft drinks bottling plant Sarajevski Kiseljak, and in 2004 the Hungarian natural mineral
water bottler Fonyodi was acquired.
Since 1958 when Ledo produced the first industrial ice cream Snjeguljica in Croatia, the
company has been synonym for top quality frozen products such as ice cream, deserts,
pastry, fruits and vegetables, fish, and ready-to-serve meals. Except in Croatia Ledo is with
a 79% share the market leader in Bosnia and Hercegowina, where it purchased the ice
cream factory in Čitluk and established the company Čitluk d.o.o. at the beginning of 2000.
Zvijezda is the largest producer of edible oils and a sole producer of margarines, vegetable
fat and mayonnaise in Croatia, being the market leader in all its product groups. The level
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
of recognition of Zvijezda's brands Zvijezda and Margo is 95% according to the conducted
surveys.
The retail sales chain of Konzum is the leader on the Croatian market and the only one
with more than 570 stores in all the counties of Croatia. Konzum d.d. is the leading retail
chain in Croatia with over 700 stores in which more than 650,000 customers do their
everyday shopping. Apart from its retail business, Konzum intensively develops its
wholesale business as well. The company has 19 VELPRO wholesale centers. Besides
being market leaders in Croatia, Konzum and Idea, Agrokor’s retail companies with total
consolidated income from sales amounting to EUR 2.67 billion, make also the largest retail
group in the Adria Region, according to a regional analysis of the retail sectors in Croatia,
Serbia and Bosnia and Herzegovina carried out by Deloitte.
Konzum has successfully developed the K plus brand program, enjoying the greatest
popularity among the Croatian customers. Konzum’s brand offer is segmented into several
subcategories, namely Standard, K plus and Volim najbolje, in order to respond to the
wishes and needs of the customers best.
Tisak, joint stock Company, is the largest newsstand retail chain with more than 1200 sales
points. It is the leading Croatian distributor of press, tobacco products, prepaid vouchers
and other merchandise that are delivered to more than 4600 sales points.
mStart d.o.o. is a member of the Agrokor Group active since July 1, 2010 when the IT
business was set up as a limited-liability company aimed at optimizing IT investments and
upgrading the Agrokor Group’s IT functions (Agrokor).
Figure 3: Agrokor Companies
Source: Agrokor
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Some important dates for Agrokor
1995 - Opening of the first Super Konzum
The Agrokor Group is registered
1999 - Introduction of the new brand Ledo riba (Ledo fish)
2000 - A new company was founded for the production of ice cream in Citluk, Bosnia and
Herzegovina by the name of Ledo Citluk
Agrokor owns a 97,4% share of Sarajevski kiseljak
2003 - Agrokor acquires 51% capital share of TP DC Sarajevo
2004 - The ice cream industry makes significant investments in newproduction and
distribution capacities (Čitluk, Sarajevo, Belgrade, Zagreb, Maribor)
First store in Bosnia and Hercegovina opened - VelPro Rajlovac
2005 - Konzum retail chain opened its first stores in Herzegovina
2007- Agrokor Group signed a Takeover Agreement for the retail and wholesale business
of VF comerce and thus, besides Croatia, became food retail leader in Bosnia &
Herzegovina
Agrokor in Balkans
Agrokor also owns some firms in other Balkan`s countries like:
It is in Serbia Dijamant (Oil and oil products) and Frikom(ice- cream industry). Idea d.o.o.
Beograd becomes member of Agrokor Group.
Dijamant AD is the largest producer of edible oils and the leading producer of margarine,
vegetable fat and delicacy products based on mayonnaise in Serbia. Beside mass
consumption products, Dijamant also produces raw materials for other food industries,
primarily the confectionery and bakery industries. Dijamant became part of Agrokor in
mid-2005. Since then, significant improvements across all business segments have been
made.
Frikom AD, the leading and largest ice-cream manufacturer in Serbia, joined the Agrokor
Group in 2003. This acquisition is of key strategic importance for Agrokor, because it
added exceptional new value to the total Agrokor production of ice cream and frozen food,
which will enable Agrokor positioning as the leading producer of this commodity group in
the region. The full impact of changes that Agrokor strongly launched acquiring Frikom in
2003 was manifested in 2004, when already in the first seven months market share grew,
consequently making Frikom the leading player in the ice cream market of Serbia
The acquisition of Idea d.o.o. conducted in 2005 is a strategically important move for
Agrokor since Idea has become the foundation for further development of Agrokor's retail
business in the region. Today, Idea has more than 150 retail stores across Serbia and 7
wholesale centers in Belgrade, Niš, Leskovac, Čačak, Novi Sad and Subotica with more
than 4,000 employees. In 2011, the company continued making new investments, mainly
aimed at expanding the retail sales network in order to make Idea stores of various formats
available to customers across Serbia. The process of optimizing the existing business
processes and increasing productivity and quality of service in retail sales continued in
2011 as well.
In Hungary Agrokor becomes owner of two Hungarian companies, the water filling plant
Fonyodi and the ice-cream factory Baldauf (today Ledo kft. Hungary)
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Except in Croatia Ledo is the market leader in Bosnia and Hercegowina, where it
purchased the ice cream factory in Čitluk and established the company Čitluk d.o.o. at the
beginning of 2000. In 2004 Ledo additionally strengthened its regional leadership
spreading its ice cream production into Hungary especially by acquisition of the Baldauf
Company, Ledo Lft. Hungary today, which is the third largest ice cream producer in
Hungary. Similar to other Agrokor companies Ledo plans to spread on the regional
markets but also on the markets of the European Union.
Sarajevski kiseljak d.d. is the leading company engaged in the production and sale of
mineral water in Bosnia and Herzegovina with a 120-year-old tradition. New era for
Sarajevski kiseljak d.d. symbolically started with 2000 when, through Jamnica, the
Agrokor Group became the majority owner of the company and started making
investments in its development. The company affirms its longtime leading position
primarily thanks to the high and recognizable quality of its mineral water, continuous
modernization and improvement of production and business processes as well as
adjustment of the company's business policy to market demands and customer needs.
Conclusion
Today the uncertain business environment cause that many companies due to changes in
the market are forced to introduce some changes its business and size of the company and
corporation in order to gain higher profit, gain competitive advantage and establish stable
operational environment within company. Those goals are mostly achieved throughout the
process of vertical integration. In order to perform efficiently all production channels must
be integrated into single line, such as connection of purchase of inputs, production,
business logistics, marketing and sale within own Retail Company.
Vertical integration represents the growth of Retail Company which establishes
connections with its supplier (upward) and consumers (downward) integration in order to
improve its competiveness. The advantages of integration include:
Higher level of product and services controlling in order to better satisfy the needs
of targeted groups and market segments
Elimination of risks in uncertain supply
Better market differentiation
Optimization and decrease of business costs
The Agrokor Group is the largest private company in Croatia and one of the leading
regional companies Apart from the Croatian companies, the Agrokor Group today also
comprises companies from all over the region acquired during the last few years: Ledo
Čitluk, Sarajevski kiseljak, Velpro Sarajevo, Frikom, Dijamant, Idea, Ledo Hungary and
Fonyodi.
Agrokor offers a superior service and pleasant shopping at reasonable prices through own
network of modern and functionally equipped retail facilities.
Why Agrokor does this?
To expand market (B&H, Serbia, Montenegro, Slovenia, Hungary etc.)
Specialized equipment or services may be needed for the industry, but are only
supplied by other firms if the industry is large and concentrated.
Labor pooling: a large and concentrated industry may attract a pool of workers,
reducing employee search and hiring costs for each firm.
Knowledge spillovers: workers from different firms may more easily share ideas
that benefit each firm when a large and concentrated industry exists
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
References
Agrokor http://www.agrokor.hr/en-GB/Naslovnica.html
Carlton, D.W.& Perloff,J.M.(2005).Modern Industrial Organisation.Pearson 4th Edition
Krugman,P.R. &Obstfeld,M.(2009).International Economics:Theory & Policy.Pearson 8th
Edition
9
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1678
Title
A name given to the resource
Vertical Integration on the Example of Agrokor
Author
Author
DRECA, Nađa
Abstract
A summary of the resource.
This study will provide the explanation of the vertical integration, benefits and show the application of the vertical integration in the real business on the example of the Croatian company Agrokor. There are always important transactions between a multinational`s operations in different countries. The output of one subsidiary is often an input into the production of another. Or technology developed in one country may be used in others. Or management may usefully coordinate the activities of plants in several countries. Multinationals exist because it turns out to be more profitable to carry out these transactions within a firm rather than between firms. This means that multinationals engaged in internalization. If you want something done right, do it yourself. Many transactions are more profitably conducted within a firm rather than between firms. Also many activities in different countries may be usefully integrated in a single firm. One of example of vertical integrated firm in Balkan is Agrokor, Croatian company. In 1989 the joint-stock company Agrokor was registered. The Agrokor Group is the largest private company in Croatia and one of the leading regional companies Apart from the Croatian companies, the Agrokor Group today also comprises companies from all over the region acquired during the last few years: Ledo Čitluk, Sarajevski kiseljak, Velpro Sarajevo, Frikom, Dijamant, Idea, Ledo Hungary and Fonyodi. From this example it is seen that vertical integrated firms benefits to all participants in the process of production and performing business. Keywords: Vertical Integration, Multinational Company, Production, Subsidiary, Profitability.
Publisher
An entity responsible for making the resource available
International Burch University
Date
A point or period of time associated with an event in the lifecycle of the resource
2013-05-10
Keywords
Keywords.
Article
PeerReviewed
Identifier
An unambiguous reference to the resource within a given context
ISSN 978-9958-834-23-3
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International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Price Discrimination Approach on the Example of UniCredit Bank dd Mostar
Nađa Dreca
International University of Sarajevo
nadja_n88@hotmail.com
Abstract
The aim of this study is to clarify the concept of the price discrimination and
to show how this concept is used in banking business on the example of the
UniCredit Bank dd Mostar. Price discrimination refers to any no uniform
pricing policy used by a firm with market power to maximize its profit. Price
Discrimination leads to change in both, quantity and price. So it is also
called no uniform pricing, charging customers different prices for the same
product or charging the single customer a price that varies depending how
many units the customer buys. There are 3 degrees of Price Discrimination.
:1st degree is different prices for both consumers and units, 2nd degree is
different prices for different units and 3rd degree is different prices to
different consumers. UniCredit Bank d.d. was the first bank in Bosnia and
Herzegovina that introduced a new, unique approach to client service model.
The basic characteristic of the whole business of the Bank was actually
based on the segmentation of clients (existing and new-potential) with
complex business lines. The business lines included meeting the needs of
clients and facing in accordance with their capabilities and needs.
Characteristics of the business model UniCredit Bank dd was the segmental
approach to the client, so that the clusters of customers would fit similar
characteristics, preferences and market position, and assign them a special
service model defined by each business line. JES! Package account is present
on the market since 2006 in the form of 4 different models adapted to the
needs of the client and used by more than 50,000 customers. JES! Account
package is available in several different models - Optimum, Expert, Student
and Senior. Account package is also practical, useful, stylish and affordable.
Keywords:Price Discrimination, Different Customers,Profit, UniCredit
Bank, Banking Products, client service model
Introduction
Instead of setting a single price some firms can use the no uniform pricing, which means
charging consumers different prices for the same product or charging single customer a
price that depends on the number of units the customers buy. By replacing a single price
with no uniform pricing the firm raises its profits .Price discrimination refers to any no
uniform pricing policy used by a firm with market power to maximize its profit.
Price Discrimination
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
A monopoly that uses no uniform prices can capture some or all of the customer surplus
and deadweight loss that results if the monopoly sets a single price.
For almost any good or service, some customers are willing to pay more than others. A
firm that sets a single price faces a trade-off between charging customers who really want
the good as much as they are willing to pay and charging a low enough price that the firm
does not lose the sales to less enthusiastic customers.
A firm can earn a higher profit by price discrimination than from setting single price. For
customers who are willing to pay more, the firm sets higher price and capture some or all
consumer surplus, and firm sells to some people who were not willing to pay as much as
the uniform price.
In order to perform price discrimination firms must satisfy certain conditions: 1. A firm
must have some market power; 2. The firm must be able to identify whom to charge the
higher price-elasticity of demand; 3. Prevent or limit resale.
There are three main degrees of Price Discrimination.
1st degree is different prices for both consumers and units
2nd degree is different prices for different units
3rd degree is different prices to different consumers
First degree (perfect) price discrimination occurs when firm sells each unit at the
maximum amount any customer is willing to pay for it, so the prices differ across
customers and a given customer may pay more for some units than for others. In this case a
monopoly is able to charge the maximum each consumer is willing to pay for each unit of
product. A firm with market power could collect the entire consumer surplus if it could
charge each customer exactly the price that that customer was willing and able to pay
(reservation price).
Second degree (quantity) price discrimination is when the firm charges different price for
large quantities than for small quantities, so the price paid by a buyer can vary with the
quantity demanded by the buyer, but all customers face the same price schedule.
Third degree (multimarket) price discrimination occurs when firm charges consumers in
different groups different unit prices. Price paid by buyers in a given group is the same for
all units purchased, but price may differ across buyer groups ( Perloff, 2009).
About the UniCredit Bank
UniCredit Bank was created by the merger of UniCredit Zagrebacka Bank and HVB
Central Profit Bank, 04.03.2008.year. With total assets of over 3.5 billion KM, capital of
350 million KM, and over 850,000 clients, the Bank operates through a network of 96
branches covering the whole territory of Bosnia and Herzegovina.
UniCredit Bank d.d. was the first bank in Bosnia and Herzegovina that introduced a new,
unique approach to client service model. The basic characteristic of the whole business of
the Bank was actually based on the segmentation of clients (existing and new-potential)
with complex business lines. The business lines included meeting the needs of clients and
facing in accordance with their capabilities and needs. Characteristics of the business
model UniCredit Bank dd was the segmental approach to the client, so that the clusters of
customers would fit similar characteristics, preferences and market position, and assign
them a special service model defined by each business line. This would be with
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
particularly educated and assigned personal bankers or the head of a business relationship.
With this organization and education of employees, UniCredit Bank is able to identify
needs and meet the expectations of its clients, as legal persons and citizens.
Bank customers, according to its flow into an account and savings are classified into a
number of categories: lower mass, mass, mass and upper income affluent clients.
According to this classification they are assigned to their family or personal banker. (
UniCredit Bank)
Price Discrimination Example
The example of price discrimination in the selected bank is represented by the type of
banking product they sell. JES! Package account is present on the market since 2006 in the
form of 4 different models adapted to the needs of the client and used by more than
100,000 customers.
JES! Account package is also practical, useful, stylish and affordable.
This way of the price discrimination represents all three degree of price discrimination, as
well as price discrimination done by bundling or Tie-In Sales .Besides banking products
and services, the JES Package as an anchor product of the Bank also provides a range of
non-banking services and facilities thereby enriching and facilitating the everyday lives
and businesses of clients which so far have been recognized by over 100.000 satisfied
users. This type of banking products is described by the following characteristics:
Convenient to the clients- banking products and services are offered in the one package
account, together with numerous non-banking privileges, also with better price than buying
each product individually.
Saves time and money - certain services within the selected model can be used by owners
and family members
Lower-cost -services purchased in the package of product are significantly cheaper than the
purchase of individual products
Modern –client operates with the Bank in a simple, modern and fast way using direct
channels such as e-service ba-internet banking for citizens, services, m-ba-a mobile
banking service for citizens and SMS services.
Monthly fee-determined price of use of products and services is distributed evenly
throughout the year
Universal package account JES! Represents a new way of transparent operations with the
Bank and its models are adapted to specific needs in different life periods and situations.
JES! - Universal package is a product designed according to modern European standards
and tailored to your needs. Use according to own preferences and needs. JES! account
package is available in several different models - Optimum, Support, Student and Senior.
As a user specified model is identified by a specially designed VISA Electron card, which
is the primary card to your JES! Package - the account.
JES user! Package includes all banking and non-bank products and services model that you
selected. At the same time, their business with the Bank will perform in a modern way,
using the advantages of new technology.
Banking facilities
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
e-banking,
m-banking services
Visa Classic Card
MasterCard with a series of compensation
standing order
discount for approval of certain bank credit products
Non-banking benefits
discounts in the shopping-service network of partner banks,
services Mondial Assistance Center-home help in the territory of BiH, on the road,
and medical and travel services
JES! account package is available in several different models - Optimum, Support, Student
and Senior.
The complete contents of a particular model can be found in the tables below.
It represents the unique sets of the services in which all banking services and products are
combined into one single UniCredit banking product, JES! Package. It does not only
include banking but also non-banking products, with lower total price than the single price
of each product.
The benefits that JES! Package brings include:
All banking products and services, together with non-banking facilities are
combined into one single package with lower price than the single price of each
product
Variety of included products that can be according to the needs
Total cost is equally distributed over monthly price of selected JES! Package
Unique assistance at home and on the road within Bosnia and Herzegovina, as
well as abroad, in cooperation with Monidal Assistance, and medical service
Family members can use some of the facilities of the selected JES! Package
JES! account package is available in several different models - Optimum, Support, Student
and Senior
Figure 1: JES! Models
Source: UniCredit Bank
Student JES! Package (Table 1) is offer intended for student population and shaped as a
package of products. It is intended for both full time and part-time students, B&H citizens
studying either in Bosnia and Herzegovina or abroad. Student package includes the
following products and services which help to students to deal with financial matters on a
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24/7 basis. This package is tailored according to the student population needs as well as by
price affordable for this population.
Table 1: Student JES! Package
JES! Student
Banking
Products and
services
included in
package
Non-banking
products
included into
package
Product Name
Student Account
Included in Model
YES
Maestro Card
YES
SMS
YES
Mobile Banking (m-ba)
Standing Order
1,00 KM
YES
24 PLUS savings -higher interest rates up to 24months
YES
Mondial assistance Services:
Access to Mondial assistance network provider
YES
Assistance at home - services in B&H;
Service of specials in emergency interventions
up to 200 KM
Visits of a doctor in the case of accident
Visits of a nurse in the case of accident
Home care after leaving hospital
Information about medical facilities and services
Information in the case of disability
up to 150 KM
up to 100 KM
up to 100 KM
YES
YES
Information about medicines and pharmacies
Help on the road for passenger car
Repairs on the spot or two vehicles
Services Abroad
YES
Medical expenses coverage
up to 2.000,00 EUR
Medical transportation in B&H
No Limit
Transportation of the deceased in B&H
up to 3.000,00 EUR
Children Return
Relatives transportation
organisation and
transport costs
coverage
up to 150 EUR
Accommodation of relatives
up to 150 EUR
Legal Assistance
up to 1.000 EUR
Baggage Delay
up to 20 EUR
Information prior to travel
YES
Information about B&H agencies Abroad
YES
Information in the case of documents
YES
Emergency message
YES
Help on the road for passenger car Abroad
Repairs on the spot or two vehicles
up to 150 EUR
Advantage of
Better Quality of life with Mondial Assistance Services
Student Model
Monthly price of the Student JES! Package
up to 300 KM
1,50 KM
Source: UniCredit Bank dd
Senior package (Figure 2) is made for the senior population with retirement income.
According to the products and services included it is attractive to this customer category. It
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provides SMS service, especially useful for this old age category. The product very
interesting to those customers is included Visa Classic Card, with deferred payment. The
price is determined according to the financial position of the seniors.
Table 2: Senior JES! Package
Senior
Banking
Products
and services
included in
package
Nonbanking
products
included
into
package
Product Name
Current Account
Included in Model
YES
Maestro Card
YES
Visa Classic Card
YES
SMS
YES
Mobile Banking (m-ba)
1,00 KM
Standing Order
YES
Allowed Limit
up to 1.500,00 KM
24 PLUS savings -higher interest rates up to
24months
Mondial assistance Services:
Access to Mondial assistance network provider
Assistance at home - services in B&H;
YES
Service of specials in emergency interventions
Visits of a doctor in the case of accident
Visits of a nurse in the case of accident
Home care after leaving hospital
Information about medical facilities and services
Information in the case of disability
up to 150 KM
up to 150 KM
up to 100 KM
up to 65 KM
YES
YES
Information about medicines and pharmacies
Help on the road for passenger car
Repairs on the spot or tow vehicles
Services Abroad
YES
Medical transportation in B&H
No Limits
Information prior to travel
YES
Help on the road for passenger car Abroad
Repairs on the spot or tow vehicles
up to 150 EUR
YES
up to 250 KM
Advantage
Better Quality of life with Mondial Assistance Services
of Expert
Model
Monthly price of the Senior JES! Package
3,00 KM
Source: UniCredit Bank dd
Optimum package, represented in Figure 3, is intended to satisfy the needs of majority of
the clients by providing the services and products that they use often. Most of the users of
this model are employed persons with middle income and for them the products included
represents the way to afford themselves better possibilities and better quality of life. EBanking provides them opportunities to deal with its financial needs with less time for
transaction and lower costs.
Table 3: Optimum JES! Package
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Optimum
Product Name
Included in Model
Banking
Products and
services
included in
package
Current Account
YES
Maestro Card
YES
Visa Classic Card
YES
SMS
YES
Internet Banking ( e-ba)
YES
Mobile Banking (m-ba)
For Optimum users - 1,50 KM
Standing Order
YES
Allowed Limit
up to 2.500,00 KM
24 PLUS savings -higher interest rates up to
24months
Mondial assistance Services:
Access to Mondial assistance network provider
Assistance at home - services in B&H;
Service of specials in emergency interventions
Visits of a doctor in the case of accident
Visits of a nurse in the case of accident
Home care after leaving hospital
YES
Information about medical facilities and services
Information in the case of disability
YES
YES
Information about medicines and pharmacies
Help on the road for passenger car
YES
Repairs on the spot or tow vehicles
up to 300 KM
Non banking
products
included into
package
YES
up to 200 KM
up to 150 KM
up to 100 KM
up to 100 KM
Services Abroad
Medical expenses coverage
up to 2.000 EUR
Medical transportation in B&H
No Limit
Medication Delivery in emergency case
up to 3.000 EUR
Transportation of the deceased in B&H
Children Return
organisation and transport costs
coverage
up to 150 EUR
Relatives transportation
up to 150 EUR
Accommodation of relatives
up to 1.000 EUR
Information prior to travel
YES
Information about B&H agencies Abroad
YES
Information in the case of documents
Help on the road for passenger car Abroad
Repairs on the spot or tow vehicles
YES
Advantage of Visa Classic Card costs lower
Optimum
Model
Monthly price of the Optimum JES! Package
up to 150 EUR
6,00 KM
Source: UniCredit Bank dd
Expert package is tailored for smaller population of the customers with high income level
and higher financial needs. This represents the widest set of the products offered by the
bank with the intention to satisfy the large needs of the selected population. The products
included and the price is set according to the preferences, and needs and customer profile.
(Figure 4).
Table 4: Expert JES! Package
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Expert
Product Name
Included in Model
Banking
Products and
services
included in
package
Current Account
YES
Maestro Card
YES
Visa Classic Card
YES
MasterCard Revolving
YES
SMS
YES
Internet Banking ( e-ba)
YES
Mobile Banking (m-ba)
YES
Standing Order
YES
Allowed Limit
up to 5.000,00 KM
Provision for mortgage and cash loans
30% Discount
24 PLUS savings -higher interest rates up to
24months
Mondial assistance Sevices:
YES
Access to Mondial assistance network provider
Assistance at home - services in B&H;
YES
Service of specials in emergency interventions
Visits of a doctor in the case of accident
up to 300 KM
up to 200 KM
Visits of a nurse in the case of accident
up to 110 KM
Medication Delivery in emergency case organization and delivery costs covered
Home care after leaving hospital
up to 60 KM
Information about medical facilities and services
Information in the case of disability
YES
YES
Information about medicines and pharmacies
Help on the road for passenger car
Repairs on the spot or tow vehicles
YES
Organization of the substitute car
YES
AccomoYEStion
up to 100 KM
Continuation of the journey
up to 300 KM
Non banking
producst
included into
package
up to 200 KM
up to 350 KM
Services Abroad
Medical expenses coverage
up to 4.500 EUR
Medical transportation in B&H
No limit
Medication Delivery in emergency case
up to 30 EUR
Transportation of the deceased in B&H
up to 3.000,00 EUR
Children Return
Relatives transportation
organidation and
transport costs coverage
up to 300 EUR
Accomodation of relatives
up to 300 EUR
Information prior to travel
YES
Information about B&H agencies Abroad
YES
Information in the case of dotocuments
YES
Emergency message
YES
Continuation of the journey
up to 150 EUR
Baggage Delay- cost coverage
up to 50 EUR
Legal Assistance
up to 1.200,00 EUR
Help on the road for passenger car Abroad
Repairs on the spot or tow vehicles
up to 200 EUR
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Organization of the substitute car
YES
AccomoYEStion
up to 85 EUR
Continuation of the journey
up to 150 EUR
Advantage of
Better Quality of life with Mondial Assistance Services
Expert Model
Monthly price of the Expert JES! Package
10,00 KM
Source: UniCredit Bank dd
Conclusion
The aim of this study is to clarify the concept of the price discrimination and to show how
this concept is used in banking business on the example of the UniCredit Bank dd Mostar.
UniCredit Bank d.d. was the first bank in Bosnia and Herzegovina that introduced a new,
unique approach to client service model. The basic characteristic of the whole business of
the Bank was actually based on the segmentation of clients (existing and new-potential)
with complex business lines. The business lines included meeting the needs of clients and
facing in accordance with their capabilities and needs. Characteristics of the business
model UniCredit Bank dd was the segmental approach to the client, so that the clusters of
customers would fit similar characteristics, preferences and market position, and assign
them a special service model defined by each business line. JES! account package is
available in several different models - Optimum, Expert, Student and Senior. Account
package is also practical, useful, stylish and affordable.
This way of the price discrimination represents all three degree of price discrimination, as
well as price discrimination done by bundling or Tie-In Sales .Besides banking products
and services, the JES Package as an anchor product of the Bank also provides a range of
non-banking services and facilities thereby enriching and facilitating the everyday lives
and businesses of clients which so far have been recognized by over 100.000 satisfied
users. It represents the unique sets of the services in which all banking services and
products are combined into one single UniCredit banking product, JES! Package. It does
not only include banking but also non-banking products, with lower total price than the
single price of each product.
Each of this model with the products included is specially designed for the certain and
targeted clients. Based on this segmentation the price of the model is determined. The
intention behind is that each customer pay his reservation price and that all consumer
surplus is caught.
References
Perloff, J.M. (2009) Microeconomics, 5th Edition, Boston, USA, Pearson Education
UniCredit Bank http://www.unicreditbank.ba/home/wps/wcm/connect/ucb_ba/utils/index/
Last Access 22nd April 2013
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The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
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1630
Title
A name given to the resource
Price Discrimination Approach on the Example of UniCredit Bank dd Mostar
Author
Author
DRECA, Nađa
Abstract
A summary of the resource.
The aim of this study is to clarify the concept of the price discrimination and to show how this concept is used in banking business on the example of the UniCredit Bank dd Mostar. Price discrimination refers to any no uniform pricing policy used by a firm with market power to maximize its profit. Price Discrimination leads to change in both, quantity and price. So it is also called no uniform pricing, charging customers different prices for the same product or charging the single customer a price that varies depending how many units the customer buys. There are 3 degrees of Price Discrimination. : 1st degree is different prices for both consumers and units, 2nd degree is different prices for different units and 3rd degree is different prices to different consumers. UniCredit Bank d.d. was the first bank in Bosnia and Herzegovina that introduced a new, unique approach to client service model. The basic characteristic of the whole business of the Bank was actually based on the segmentation of clients (existing and new-potential) with complex business lines. The business lines included meeting the needs of clients and facing in accordance with their capabilities and needs. Characteristics of the business model UniCredit Bank dd was the segmental approach to the client, so that the clusters of customers would fit similar characteristics, preferences and market position, and assign them a special service model defined by each business line. JES! Package account is present on the market since 2006 in the form of 4 different models adapted to the needs of the client and used by more than 50,000 customers. JES! account package is available in several different models - Optimum, Expert, Student and Senior. Account package is also practical, useful, stylish and affordable. Keywords: Price Discrimination, Different Customers, Profit, UniCredit Bank, Banking Products, client service model.
Publisher
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International Burch University
Date
A point or period of time associated with an event in the lifecycle of the resource
2013-05-10
Keywords
Keywords.
Article
PeerReviewed
Identifier
An unambiguous reference to the resource within a given context
ISSN 978-9958-834-23-3
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https://omeka.ibu.edu.ba/files/original/14491bc34f24a8b8dabb143dc5e26b64.pdf
0d24224a371a0443404f9e1a275bb0cf
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International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
ICSID Arbitration and Turkey in Terms of Subject and Party
Süleyman Dost
Süleyman Demirel University, Isparta, Turkey
suleymandost@sdu.edu.tr
The International Centre for Settlement of Investment Disputes (ICSID) is an
autonomous international institution established under the Convention on the
Settlement of Investment Disputes between States and Nationals of Other
States (the ICSID or the Washington Convention) with over one hundred and
fifty five member States. Turkey signed and ratified ICSID Convention. The
primary purpose of ICSID is to provide facilities for conciliation and arbitration
of international investment disputes.
ICSID has become the leading arbitration institution for the resolution of
investor-state disputes. This arbitration system is different from the other
arbitration. First of all, ICSID was established by the Convention as an impartial
international forum providing facilities for the resolution of legal disputes
between eligible parties, through arbitration procedures. Second, The
Convention sought to remove major impediments to the free international
flows of private investment posed by non-commercial risks and the absence of
specialized international methods for investment dispute settlement. Third,
recourse to the ICSID facilities is always subject to the parties' consent. Fourth,
as evidenced by its large membership, considerable caseload, and by the
numerous references to its arbitration facilities in investment treaties and
laws, ICSID plays an important role in the field of international investment and
economic development.
Today, companies considering an investment in a foreign country, must be
aware of ICSID and the other treaties providing access to ICSID. For example,
Bilateral Investment Treaties (BIT’s) Energy Charter Treaty (ECT) and
Multilateral Treaties (MIT’s). Turkey has signed namerous BIT’s with different
countries. Furthermore, Turkey ratified the Energy Charter Treaty (ECT) that
includes a provision regarding ICSID arbitration. Due to the steps taken by
Turkey to create a more appropriate legal climate for investments during 90’s,
foreign investors have brought eight arbitration cases before the ICSID against
Turkey since 2002.
In this study, firstly, ICSID arbitration system and arbitration cases against
Turkey will be taken hand. Then Turkish investor’s cases against host state will
be indicate. Finally general assesment will be made for Turkey and the other
parties of ICSID Convention.
Keywords: Arbitartion, Investment, ICSID, Turkey.
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ee55b407fc14ec37b73a9d61eaf3be15
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2a85b32a40aa1df4f57d031bb31baf8f
PDF Text
Text
International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
ICSID Arbitration and Turkey in Terms of the Subject and Parties
Suleyman Dost
Suleyman Demirel University, Isparta, Turkey
suleymandost@sdu.edu.tr
Abstract
The International Centre for Settlement of Investment Disputes (ICSID) is an
autonomous international institution established under the Convention on the
Settlement of Investment Disputes between States and Nationals of Other States
(the ICSID or the Washington Convention) with over one hundred and fifty five
member States. Turkey signed and ratified ICSID Convention. The primary purpose
of ICSID is to provide facilities for conciliation and arbitration of international
investment disputes.
ICSID has become the leading arbitration institution for the resolution of investorstate disputes. This arbitration system is different from the other arbitration. First of
all, ICSID was established by the Convention as an impartial international forum
providing facilities for the resolution of legal disputes between eligible parties,
through arbitration procedures. Second, The Convention sought to remove major
impediments to the free international flows of private investment posed by noncommercial risks and the absence of specialized international methods for
investment dispute settlement. Third, recourse to the ICSID facilities is always
subject to the parties' consent. Fourth, as evidenced by its large membership,
considerable caseload, and by the numerous references to its arbitration facilities in
investment treaties and laws, ICSID plays an important role in the field of
international investment and economic development.
Today, companies considering an investment in a foreign country, must be aware of
ICSID and the other treaties providing access to ICSID. For example, Bilateral
Investment Treaties (BIT’s) Energy Charter Treaty (ECT) and Multilateral Treaties
(MIT’s). Turkey has signed namerous BIT’s with different countries. Furthermore,
Turkey ratified the Energy Charter Treaty (ECT) that includes a provision regarding
ICSID arbitration. Due to the steps taken by Turkey to create a more appropriate
legal climate for investments during 90’s, foreign investors have brought eight
arbitration cases before the ICSID against Turkey since 2002.
In this study, firstly, ICSID arbitration system and arbitration cases against Turkey
will be taken hand. Then Turkish investor’s cases against host state will be indicate.
Finally general assesment will be made for Turkey and the other parties of ICSID
Convention.
Key Words:arbitration, Investment, ICSID, Turkey.
Introduction
ICSID Convention, which came into force on 14th October 1966 established an
International Centre for Settlement of Investment Disputes. This Convention, which is also
referred to as Washington Convention came into force in Turkey on 02nd.04.1989. ICSID
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Convention mainly aims to stop disputes being a political tool and a threat factor and
resolve the disputes on a platform where the benefits of both parties are balanced. (Emek,
27)The Convention provides the ways of conciliation and arbitration for that.
464 applications have been registered so far. 255 of these have been concluded1 and 169 of
them are still on trial2. Applications show that, disputes mainly come up in areas of
banking, construction, energy, health, industry, mining, tourism and agriculture3.
ICSID (The International Centre) established within the body of the World Bank offers an
objective and reliable arbitration case in the resolution of disputes between foreign
investors and the host state. The Centre also aims to clear the concerns of foreign investors
and to motivate them for investing in foreign states and to reduce the negative attempts of
the host state towards investment.
ICSID Arbitration
Trial authority of the Centre covers legal disputes between states that are a party to ICSID
Convention and the citizens of other states that are also a party to ICSID Convention, who
have submitted their written consent related to the dispute to the General Secretariat. After
the submission of consent, no party can withdraw it back unilaterally (Article 25 of the
ICSID). Trial authority of the ICSID Arbitration Centre depends on three factors: The first
one is the presence of a legal benefit dispute, arising directly out of the investment. The
second one is the consents of the parties. And the third one is the requirement that the host
state and the sending state are both parties to the ICSID Convention. (Sassoon, 102)So, it is
possible to discuss the trial authority of the Centre with respect to the subject of the trial,
parties of the dispute and consents of the parties (Nomer et al., 54):
1-Trial Subject
In the presence of a subject relevant to the tribal authority of the Centre, there has to be a
legal dispute directly related to investment as a first condition4. (De Cassio, 230;
Amerasinghe, 636)Consequently; political, economic, financial or commercial disputes are
included within the scope of ICSID trial. (De Cassio, 230)
As the Convention not defines investment, wills of parties shall be studied. (Azrak, 27;
Wagner, 472; Kurtz, 20) In ICSID arbitration, troubles related to subject limitation are too
rare. (Park et al., 453; Hornick, 189; Escobar, 140) Any kind of dispute related to
investment can generally be a trial subject in an ICSID arbitration system. However;
expenses made by the Claimant prior to investment are not regarded as investments with
respect to Article 25 of ICSID5.
2-Parties
According to ICSID Convention, one of the parties is a state party to the Convention and
the other party is the citizen of another state which also is a party to the Convention
(Article 25 of the ICSID). So, disputes, parties of which are real and/or special legal
entities or states are outside the authority of ICSID.
One party of the dispute is the host state where the investment is made. In order for a
dispute to be resolved by ICSID arbitration, the host state shall be a party to ICSID and
1
See: https://icsid.worldbank.org (23.04.2013)
See: https://icsid.worldbank.org (23.04.2013)
3
See: https://icsid.worldbank.org (23.04.2013)
4
See for additional knowledge: Mihaly - Sri Lanka, Award, ICSID Case No:00/2, p.32.
5
Mihaly - Sri Lanka, Award, ICSID Case No:00/2, p.28-33, 52-54, ve 61-62.
2
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
have consent on arbitration issue. Moreover it is allowed that; the subunits forming any
country or the state which has assigned a representative to the Centre is a party to the
dispute (Erten, 216; Tawil, 278).
The other party of the dispute is the citizen of another state which is a party to the ICSID
Convention (De Cassio, 230). This statement expresses the real or legal entities possessing
the citizenship of a state party apart from the home state which was a partof the Centre at
the date when the application was submitted to the Centre (Article 25/2-a of the ICSID). In
case of dual citizenship, the investor can apply for ICSID arbitration if the state he/she is a
citizen of is a party to the ICSID Convention6 (Nomer et al., 55). 23 ICSID Convention
accepts that, if a prior agreement is made, companies under the control of foreign powers
will be treated in the host state as a citizen of another state which is a party to the
Convention (Article 25/2-b of the ICSID).
3-Written Arbitration Convention
In order for an international investment dispute to be resolved by ICSID arbitration, there
must be a relevant written arbitration convention carried out between parties. This is an
obligatory condition for the beginning of ICSID arbitration procedure (sine qua non
condition). A valid arbitration deal means consent to arbitration. This consent relation can
be provided with an arbitration condition or an independent arbitration deal (De Cassio,
229). Parties might give this consent before or after dispute (Günuğur,339). In most of the
disputes that come up in practice, this consent is given on the condition of arbitration put
into the investment agreement (Nomer et al., 54). This consent is also given in BIT’s
carried out between states.
States that have signed the ICSID Convention doesn’t mean that they give consent
(Amerasinghe, 636; Şanlı, 9). This shows the states’ desire to get into an ICSID arbitration
system. It doesn’t pose an obligation7 (Erten, 218). Declaration of consent for arbitration
shall be given for a certain dispute. Being a party to the ICSID Convention doesn’t require
parties to give consent for applying for ICSID arbitration for the resolution of a dispute
included within the scope of the Convention (De Cassio, 229). On the other hand; some
consent declaration might not cover the consent required by the Convention for the tribal
authority of the Centre. However; once the parties have submitted their consents to the
Centre, it is not possible for them to withdraw these back unilaterally8 (Sassoon, 103).
Consents of the parties for arbitration within the framework of the Convention means they
have rejected any solution outside the Convention unless stated otherwise. However; states
might demand as a prior condition for these consents that, local administrations and legal
ways have been exhausted (Article 26 of the ICSID).
On the other hand; the Convention allows states to make declaration for the types of
disputes they don’t want to put through ICSID arbitration any time. (Article 25/4 of the
ICSID). This means, providing that they make the necessary declaration, they can restrict
their membership to the Centre as long as they desire. Consequently; foreign investors
shall study and monitor the concerns put into the Convention by the host state. Because in
some cases, signing of the ICSID Convention might only be for promotional reasons
(Altıntaş, 19). 36
6
Olguin - Paraguay, Award, ICSID Case No:98/5, p.60-61.
CSOB - Slovak Republic, Decision, ICSID Case No:97/4, p.36.
8
Article 25 of the ICSID.
7
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
ICSID Arbitration and Turkey
In General
Turkey signed the ICSID Convention on 24th.06.1987 and approved it with Law No 3460
dated as 27th.05.1988. 37So far, eight disputes have been submitted to ICSID arbitration
against Turkey. And thirteen Turkish origin companies have applied for ICSID arbitration
against various states. The amounts both in arbitration cases sued against Turkey and sued
by Turkish origin companies are quite high. Thus; ICSID arbitration is very important.
Here, ICSID arbitration cases against Turkey will be discussed first and then, ICSID
arbitration cases sued by Turkish citizens against various states will be discussed.
Cases against Turkey
Here, concluded cases against Turkey will be discussed first and then, cases still in
progress will be discussed.
Concluded Cases
1-PSEG Global Inc. and Konya Ilgin Elektrik Üretim ve Ticaret Limited Sirketi v.
Republic of Turkey9
The first application to ICSID against Turkey was the application of an enterprise
consisting of PSEG Global Inc. and Konya Ilgın Elektrik Üretim ve Ticaret Limited Şti.,
which was registered on 2nd May 2002. The arbitration procedure carried out for the
dispute arising from the Electricity power plant project was concluded on 19thJanuary
2007. Turkey was given a penalty of 9 million USD Dollars of compensation and it was
required to pay 65% of the costs of the case.
2-Motorola Credit Corporation, Inc. v. Republic of Turkey10
The application made by the American Motorola company was registered on 04th January
2004. As parties came to a mutual agreement, the dispute on communication networks was
ended on 21st November 2005 by the Tribunal according to Cl. 43/1 of ICSID Arbitration
Rules. There are no documents issued about this case. This case is a one that was ended
after the mutual agreement of the parties after the arbitration process had started.
3-Saba Fakes v. Republic of Turkey11
The arbitration procedure started upon the application of Netherlander Saba Fakes on 13th
August 2007 was concluded on 14th July 2010. The case won about mobile communication
services and Turkey the case. It was claimed that Telsim, whose shares mostly belonged to
the claimant, was seized by Turkey and sold to a third party. In return, Turkey claimed that
the investment on trial didn’t either carry the “investment” conditions stated in BIT made
between Turkey and Holland or the ICSID Convention Cl. 25/1. The tribunal
acknowledged that Turkey was right in its defense.
9
PSEG Global Inc. and Konya Ilgin Elektrik Üretim ve Ticaret Limited Sirketi v. Republic of Turkey,ICSID
Case No. ARB/02/5.
10
Motorola Credit Corporation, Inc v. Republic of Turkey,ICSID Case No. ARB/04/21.
11
Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
4-Europe Cement Investment and Trade S.A. v. Republic of Turkey12
The application submitted by the Polish Europe Cement Company was registered on 6 th
March 2007. The arbitration case performed within the framework of the Additional
Facility Rules of ICSID was about electricity concession and Turkey won the case on 13th
August 2009. In the case, the claimant claimed that it was the owner of ÇEAŞ and Kepez
Electricity shares and was injured as Turkey seized these companies. Respondent Turkey
claimed that, owners of ÇEAŞ and Kepez Electricity had not carried out the required legal
procedures and declarations for transfer. Turkey also stated that, the claimant didn’t
possess the “investor” charter defined in Energy Charter Treaty. The tribunal concluded
the case for non-authority, it found Turkey right.
5-Cementownia “Nowa Huta” S.A. v. Republic of Turkey13
The application made by Polish Cementownia “Nowa Huta” Company was registered on
16th November 2006. The case was about electricity concession. The case was resolved
within the framework of ICSID’s Additional Facility Rules as Poland was not a party to
the ICSID Convention. In the case, the claimant claimed that it was the owner of ÇEAŞ
and Kepez Electricity shares and was injured as Turkey seized these companies.
Respondent Turkey claimed that, owners of ÇEAŞ and Kepez Electricity had not carried
out the required legal procedures and declarations for transfer. Turkey also stated that, the
claimant didn’t possess the “investor” charter defined in the Energy Charter Treaty. The
case was concluded on 17th September 2009 and Turkey won it.
Cases Still in Progress
1-Libananco-Republic of Turkey14
Another application submitted to ICSID against Turkey is the application of Libananco
Company from Southern Cyprus. Application of Libananco submitted to ICSID against
Turkey was registered on 19th April 2006.
The case was about electricity generation and distribution concession. Republic of
Turkey’s Ministry of Energy seized the current assets of ÇEAŞ and Kepez Electricity
based on the claim that it failed to fulfill its undertakings stated in the Concession Contract.
Libananco Company on the other hand claimed that, it owned 66% of these seized
company’s assets and was injured by this seizure. Respondent Turkey claimed that the
owners of ÇEAŞ and Kepez Electricity had failed to fulfill the legal procedures and make
necessary declarations. Turkey further claimed that the Claimant didn’t fulfill the
“investor” charter defined in the Energy Charter Treaty. The case was concluded on 2nd
September 2011 and Turkey won it. On 20th December 2011, Libananco Company applied
for the cancellation of the decision. The trial performed upon this application for
cancellation is still in progress.
2- Alaplı Electric B.V. v. Republic of Turkey15
An arbitration trial made upon Netherlander Alaplı Elektrik’s application on 27th August
2008 was concluded on 16th July 2012. Turkey won the case about the dispute about
electricity concession. Judge Marc Lalonde lodged a statement of opposition to the
decision and on 16th November 2012, a cancellation application was made to present new
evidences. The trial performed upon the application for cancellation is still in progress.
12
Europe Cement Investment and Trade S.A. v. Republic of Turkey, ICSID Case No. ARB(AF)/07/2.
Cementownia "Nowa Huta" S.A. v. Republic of Turkey, ICSID Case No. ARB(AF)/06/2.
14
Libananco Holdings Co. Limited-Republic of Turkey, ICSID Case No: ARB/06/8.
15
Alaplı Elektrik B.V. v. Republic of Turkey, ICSID Case No. ARB/08/13.
13
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
3-Tulip Real Estate Development Netherlands B.V. v. Republic of Turkey16
The application of Tulip Real Estate Development Netherlands against Turkey was
registered on 28th October 2011. The dispute arises from the residential and commercial
construction project. Arbitration trial is still in progress.
Evaluation
In ICSID arbitration trial process started by Libananco, Europe Cement and Cementownia
“NowaHuta” against Turkey, it was investigated whether claimants possessed the
conditions of an investor within the framework of the ICSID Convention, Energy Charter
and BIT. In these trials, tribunals decided that claimant investors did not fulfill the
“investor” conditions defined in the relevant regulations. According to domestic
legislation, the claimant should have recorded the registered shares into the shareholders’
register of the company after the submission of endorsements and commercial papers.
However, claimants didn’t fulfill these conditions. Furthermore; it was concluded in these
trials that claimants acted in bad faith. The same thing is true for the Saba Fakes case.
This case sued against Turkey by PSEG/Ilgın is the first experience of Turkey in ICSID
arbitration case. In this case, the arbitration tribunal regarded the dispute arising from the
concession contracts as an investment dispute within the scope of the ICSID Convention
and BIT. The tribunal stated that, current regulations and BIT showed Turkey had consent
for ICSID trial and so rejected Turkey’s opposition that no resolution procedure was set
forth in BIT. The tribunal also rejected claimant investor’s some claims related to the base
of dispute.
The tribunal also concluded that the investor failed to fulfill some of its obligations set
forth in Law No 4501. In conclusion; although Turkey was sentenced to pay compensation
to the claimant, the claimant was unable to get the result it desired.
Cases of Turkish People/Companies
Today, Turkey has come to be a home state as well as a host state. Consequently, Turkish
citizens and companies investing in foreign states that are parties to ICSID Convention can
also apply to ICSID arbitration. Arbitration trials started withfive Turkish companies
against host states have been concluded so far and arbitration trials of eight more
companies are still in progress. Turkish companies will also have their disputes related to
investments in ICSID arbitration henceforward.
Concluded Cases
1-Bayındır Insaat Turizm Ticaret ve Sanayi A.S. v. Islamic Republic of Pakistan17
Arbitration application made by Turkish Bayındır Insaat Turizm Ticaret ve Sanayi
A.S.Against Pakistan was registered on 1st December 2003. The case, the dispute subject
of which was highway construction contract, was concluded on 27th August 2009 and
Pakistan won the case.
16
17
Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/11/28.
Bayındır Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, Case No. ARB/03/29.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
2-Rumeli Telekom A.S. & Telsim Mobil Telekomunikasyon Hizmetleri A.S. v.
Republic of Kazakhstan18
Arbitration application made by Turkish Rumeli Telekom A.S. & Telsim Mobil
Telekomunikasyon Hizmetleri A.S. Against Kazakhstan was registered on 30th August
2006. The case, the dispute subject of which was telecommunication, was concluded on
29th July 2009. However; cancellation application was made on 7th November 2009. The
decision was given on 25th March 2010.
3-Sistem Muhendislik Insaat Sanayi ve Ticaret A.S. – Kyrgyz Republic19
Arbitration application made by Turkish Sistem Muhendislik Insaat Sanayi ve Ticaret A.S.
Against Kyrgyzstan was registered on 12th April 2006. The case, the dispute subject of
which was a hotel construction project, was concluded on 9th September 2009.
4-Barmek Holding A.S. v. Republic of Azerbaijan20
Arbitration application made by Turkish Barmek Holding A.S.Against Azerbaijan was
registered on 16th October 2006. The case, the dispute subject of which was electricity
concession, was concluded on 28th September 2009 with the agreement of the parties
according to Rule 43/2 of the ICSID Arbitration Rules.
5-ATA Construction, Industrial and Trading Company v. Kingdom of Jordan
Arbitration application made by Turkish ATA Construction, Industrial and Trading
Companyagainst Kingdom of Jordan was registered on 28thFeb 2008. The case, the dispute
subject of which wasWaterway Construction Project, was concluded on 18thMay 2010.
However; cancellation application was made on 27thSeptember 2010. The ad hoc
Committee issues an order taking note of the discontinuance of the proceeding pursuant to
ICSID Arbitration Rule 44, on July 11, 2011.
Cases Still in Progress
1-Adem Doğan v. Turkmenistan21
Arbitration application made by Turkish citizen Adem Doğan against Turkmenistan was
registered on 22nd May 2009. The dispute subject of the case is a chicken farm and the case
is still in progress.
2-Kilic Insaat Ithalat Ihracat Snayi ve Ticaret Anonim Şirketi v. Turkmenistan22
Arbitration application made by Turkish Kilic Insaat Ithalat Ihracat Sanayi ve Ticaret
Anonim Sirketi against Turkmenistan was registered on 19th January 2010. In the case, the
dispute subject of which is a construction project, on 7th May 2012 the Arbitration tribunal
gave the decision that the claimant had to apply to local jurisdiction at first according to the
BIT made between Turkey and Turkmenistan. Consequently; the arbitration case is still in
progress.
18
Rumeli Telekom A.S. & Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan,
Case No: ARB/05/16.
19
Sistem Muhendislik Insaat Sanayi ve Ticaret A.S.-Kyrgyz Republic, Case No: ARB (AF) /06/1.
20
Barmek Holding A.S. v. Republic of Azerbaijan (ICSID Case No. ARB/06/16)
21
Adem Dogan v. Turkmenistan, ICSID Case No. ARB/09/9.
22
Kilic Insaat Ithalat Ihracat Sanayi ve Ticaret Anonim Sirketi v. Turkmenistan, ICSID Case No. ARB/10/1.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
3-Ömer Dede and Serdar Elhüseyni v. Romania23
Arbitration application made by Turkish Ömer Dede against Romania was registered on
19th November 2010. The case, the dispute subject of which is agricultural machines and
equipments, is still in progress.
4-Içkale Insaat Limited Sirketi v. Turkmenistan24
Arbitration application made by Turkish Ickale Insaat Limited Sirketi against
Turkmenistan was registered on 20th December 2010. The case, the dispute subject of
which is designing and construction contract, is still in progress.
5-Turkiye Petrolleri Anonim Ortaklığı v. Republic of Kazakhstan25
Arbitration application made by Turkish Fuel Oils Incorporated Partnership (TPAO in
Turkish) against Kazakhstan was registered on 14th January 2011. The case, the dispute
subject of which is Fuel oils search and production, is still in progress.
6-Garanti Koza LLP v. Turkmenistan26
Arbitration application made by Turkish Garanti Koza against Turkmenistan was
registered on 20th July 2011. The case, the dispute subject of which is a construction
project, is still in progress.
7-Muhammet Çap & Sehil Insaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan27
Arbitration application made by Turkish Muhammet Çap & Sehil Insaat Endustri ve
Ticaret Limited Sirketi against Turkmenistan was registered on 26th March 2012. The case,
the dispute subject of which is a construction project, is still in progress.
8-Karkey Karadeniz Elektrik Üretim A.S. v. Islamic Republic of Pakistan28
Arbitration application made by Turkish Karkey Karadeniz Elektrik Üretim Anonim
Sirketi against Pakistan was registered on 8th February 2013. The case, the dispute subject
of which is, energy generation equipment, is still in progress.
Conclusion
The following can be stated about ICSID Convention and Turkey under the light of the
above mentioned decisions:
1-Turkey is a home state as well as a host state. Consequently, international arbitrations
have now become a way for jurisdiction Turkish enterprises can apply to for the disputes
arising from their international investments.
2-ICSID arbitration where one of the parties is a state is the most appropriate way of
jurisdiction for the resolution of disputes arising from foreign investments. International
commercial arbitration and particularly the ICSID arbitration is superior to the decisions
given by foreign state courts. Because parties have the right to specify their own judge and
the ways and principles they are going to use in their arbitration cases.
23
Ömer Dede and Serdar Elhüseyni v. Romania ICSID Case No. ARB/10/22.
Içkale Insaat Limited Sirketi v. Turkmenistan ICSID Case No. ARB/10/24.
25
Türkiye Petrolleri Anonim Ortaklığı v. Republic of Kazakhstan (ICSID Case No. ARB/11/2)
26
Garanti Koza LLP v. Turkmenistan (ICSID Case No. ARB/11/20)
27
Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan (ICSID Case No. ARB/12/6)
28
Karkey Karadeniz Elektrik Uretim A.S. v. Islamic Republic of Pakistan(ICSID Case No. ARB/13/1)
24
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
3-Attracting foreign investments are among the priorities of Turkey just like all other
developing countries. Foreign investors accepts international arbitration as one of the most
significant elements of a legally reliable environment to invest in another country.
Consequently; arbitration is a preferable resolution area for disputes in investment
contracts.
4-Arbitration decisions given within the framework of ICSID Convention are binding for
all members. The decision in question can be applied as a decision given by the national
court of the member state.
5-It shall also be kept in mind that; ICSID arbitration system is the guarantee of the
investments to be carried out by Turkish enterprises in foreign states.
6-In cases sued by foreign investors against Turkey, Turkey has mostly treated then
investor in a fair way and conformed to the terms of multiple party treaties like BIT and
Energy charter. In this sense, it can easily be said that Turkey is a suitable state for foreign
investors.
References
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N.H.E.J., N.V. Koninklijke, Boekhandel en Drukkerj.
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Tahkim Kurulları.Hazine Dergisi, Sayı:10.
Azrak, A.Ü., (1999).İdari Sözleşmeler ve Uluslararası Tahkim-Panel. Türkiye Barolar
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Emek, U., (1999).Uluslararası Ticarette Tahkim ProsedürüDPT.
Erten, R, (1998).ICSID Tahkimi.BATİDER, C.XIX, Sayı:4, Ankara.
Escobar, A.A., (2002).Introductory Note-Mihaly International Corporation - Democratic
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Günuğur, H, (1999).Türk Hukukunda ve Türkiye’nin Taraf Olduğu, Yabancı Sermaye
Yatırımlarından Doğan Sorunların Çözümünde Tahkim (ICSID) Prosedürü.Faruk
Erem Armağanı, TBB Yayınları, Ankara.
Hornick, R.N., (2003).The Mihaly Arbitration Pre-Investment Expenditure as a Basis for
ICSID Jurisdiction.Journal of International Arbitration, 20(2), p.189-192.
Kurtz, J, (2002).A General Investment Agreement in the WTO? Lessons from Chapter 11
of NAFTA and the OECD Multilateral Agreement on Investment. Jean Monnet
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Working Paper 6/02, New York University School of Law, New York.Retrieved
23.04.2013 fromwww.jeanmonnetprogram.org/papers/02/020601.pdf.
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Mestmacker) Nomos Verlagsgeselschaft Baden-Baden.
Şanlı, C., (1999).İdari Sözleşmeler ve Uluslararası Tahkim-Panel.Türkiye Barolar Birliği,
Ankara.
Tawil, G.S., Commentary:ICSID Jurisdiction and the Request For Arbitration.Arbitration
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Awards of ICSID (Awards retrieved 23.04.2013, from https://icsid.worldbank.org)
Adem Dogan v. Turkmenistan, ICSID Case No. ARB/09/9.
Alaplı Elektrik B.V. v. Republic of Turkey, ICSID Case No. ARB/08/13.
Barmek Holding A.S. v. Republic of Azerbaijan, ICSID Case No. ARB/06/16.
Bayındır Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, Case No.
ARB/03/29.
Cementownia "Nowa Huta" S.A. v. Republic of Turkey, ICSID Case No. ARB(AF)/06/2.
CSOB - Slovak Republic, Decision, ICSID Case No:97/4, p.36.
Europe Cement Investment and Trade S.A. v. Republic of Turkey, ICSID Case No.
ARB(AF)/07/2.
Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/11/20.
Içkale Insaat Limited Sirketi v. Turkmenistan, ICSID Case No. ARB/10/24.
Karkey Karadeniz Elektrik Uretim A.S. v. Islamic Republic of Pakistan,ICSID Case No.
ARB/13/1.
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No. ARB/10/1.
Libananco Holdings Co. Limited-Republic of Turkey, ICSID Case No: ARB/06/8.
10
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Mihaly - Sri Lanka, Award, ICSID Case No:00/2, p.32.
Motorola Credit Corporation, Inc v. Republic of Turkey,ICSID Case No. ARB/04/21.
Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case
No. ARB/12/6.
Olguin - Paraguay, Award, ICSID Case No:98/5, p.60-61.
Ömer Dede and Serdar Elhüseyni v. Romania, ICSID Case No. ARB/10/22
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of Turkey,ICSID Case No. ARB/02/5.
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Kazakhstan, Case No: ARB/05/16.
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(AF)/06/1.
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ARB/11/2.
11
�
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1618
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ICSID Arbitration and Turkey in Terms of Subject and Party
Author
Author
DOST, Suleyman
Abstract
A summary of the resource.
The International Centre for Settlement of Investment Disputes (ICSID) is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention) with over one hundred and fifty five member States. Turkey signed and ratified ICSID Convention. The primary purpose of ICSID is to provide facilities for conciliation and arbitration of international investment disputes. ICSID has become the leading arbitration institution for the resolution of investor-state disputes. This arbitration system is different from the other arbitration. First of all, ICSID was established by the Convention as an impartial international forum providing facilities for the resolution of legal disputes between eligible parties, through arbitration procedures. Second, The Convention sought to remove major impediments to the free international flows of private investment posed by non-commercial risks and the absence of specialized international methods for investment dispute settlement. Third, recourse to the ICSID facilities is always subject to the parties' consent. Fourth, as evidenced by its large membership, considerable caseload, and by the numerous references to its arbitration facilities in investment treaties and laws, ICSID plays an important role in the field of international investment and economic development. Today, companies considering an investment in a foreign country, must be aware of ICSID and the other treaties providing access to ICSID. For example, Bilateral Investment Treaties (BIT’s) Energy Charter Treaty (ECT) and Multilateral Treaties (MIT’s). Turkey has signed namerous BIT’s with different countries. Furthermore, Turkey ratified the Energy Charter Treaty (ECT) that includes a provision regarding ICSID arbitration. Due to the steps taken by Turkey to create a more appropriate legal climate for investments during 90’s, foreign investors have brought eight arbitration cases before the ICSID against Turkey since 2002. In this study, firstly, ICSID arbitration system and arbitration cases against Turkey will be taken hand. Then Turkish investor’s cases against host state will be indicate. Finally general assesment will be made for Turkey and the other parties of ICSID Convention. Keywords: Arbitartion, Investment, ICSID, Turkey.
Publisher
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International Burch University
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2013-05-10
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Article
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ISSN 978-9958-834-23-3
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https://omeka.ibu.edu.ba/files/original/2eaac69d35c1faa711fd0ddc30200a9e.pdf
e882267a1e5ab52271deda1771980d77
PDF Text
Text
International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
A Case Study of Electronic Government Adoption
Dzenan Donko
International Burch University, Sarajevo, Bosnia and Herzegovina
Meliha Handzic
International Burch University, Sarajevo, Bosnia and Herzegovina
mhandzic@ibu.edu.ba
Electronic government initiatives in Bosnia and Herzegovina are still in its
infancy and facing many issues and challenges. Therefore, the main goal of
this study is to gain a better understanding of these issues and challenges
by examining the adoption and diffusion of ‘e-government services’ from
the citizen’s perspective at the local municipal level.
Sixty nine usable responses were obtained from one hundred surveyed
citizens with permanent residency in the Centar Municipality Sarajevo. The
participants were asked about their perceptions of different aspects of egovernment services provided by their municipality.
The results are encouraging. The citizens of Centar Municipality Sarajevo
perceived their municipal e-government system as useful, easy to use, and
having a high level of information quality. Consequently, they were willing
to use e-government, particularly for accessing laws and by-law acts, filing
state taxes, ordering birth, death and marriage certificates, renewing
drivers’ licenses, registration and shopping. However, they were not in
favour of using internet for online voting.
Keywords: Electronic Government, Local Government, Case Study,
Municipality Centar-Sarajevo
88
�
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1504
Title
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A Case Study of Electronic Government Adoption
Author
Author
DONKO, Dzenan
HANDZIC, Meliha
Abstract
A summary of the resource.
Electronic government initiatives in Bosnia and Herzegovina are still in its infancy and facing many issues and challenges. Therefore, the main goal of this study is to gain a better understanding of these issues and challenges by examining the adoption and diffusion of ‘e-government services’ from the citizen’s perspective at the local municipal level. Sixty nine usable responses were obtained from one hundred surveyed citizens with permanent residency in the Centar Municipality Sarajevo. The participants were asked about their perceptions of different aspects of egovernment services provided by their municipality. The results are encouraging. The citizens of Centar Municipality Sarajevo perceived their municipal e-government system as useful, easy to use, and having a high level of information quality. Consequently, they were willing to use e-government, particularly for accessing laws and by-law acts, filing state taxes, ordering birth, death and marriage certificates, renewing drivers’ licenses, registration and shopping. However, they were not in favour of using internet for online voting. Keywords: Electronic Government, Local Government, Case Study, Municipality Centar-Sarajevo
Publisher
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International Burch University
Date
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2013-05-10
Keywords
Keywords.
Article
PeerReviewed
Identifier
An unambiguous reference to the resource within a given context
ISSN 2303-4564
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International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
The Relationship between Corporate Governance and
Performance of Insurance Firms: Evidence from Turkey
Mesut Doğan
Afyon Kocatepe Üniversitesi, Afyon, Turkey
mesutdogan@aku.edu.tr
Bilge Leyli Elitaş
Yalova Üniversitesi, Yalova, Turkey
bilgeleyli@yalova.edu.tr
Ramazan Nacar
Yalova Üniversitesi, Yalova, Turkey
rnacar@yalova.edu.tr
There are many studies in the field of corporate governance from all
around the world. In accordance with these studies, it is emphasized that it
cannot be mentioned about any single corporate governance model which
is valid for all countries. Thus, this study aims to research the relationship
between corporate governance and performance of insurance firms. Data
used in this study is derived from seven insurance firms listed on İstanbul
Stock Exchange (ISE) and it is limited to 2005-2011 periods. The effects of
corporate governance on performance of insurance firms are analyzed by
correlation and multiple regression analysis. In the study, Return on Asset
(ROA) and Return on Equity (ROE) are used as performance indicators of
insurance firms, namely the dependent variables. The variables such as
number of employees, size of assets, free float rate, size of board of
directors, number of independent members and CEO duality of insurance
firms are used as corporate governance indicators, namely the
independent variables. According to the hypotheses developed, the
relationships between corporate governance and performance of
insurance firms will be analyzed and findings will be reported.
Keywords: Corporate Governance İnsurance Companies Firm Performance.
202
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International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
The Relationship between Corporate Governance and Performance of
Insurance Firms: Evidence from Turkey
Mesut Doğan
Afyon Kocatepe University, Afyonkarahisar, Turkey
mesutdogan@aku.edu.tr
Bilge Leyli Elitaş
Yalova University, Yalova, Turkey
bilgeleyli@yalova.edu.tr
Ramazan Nacar
Yalova University, Yalova, Turkey
rnacar@yalova.edu.tr
Abstract
There are many studies in the field of corporate governance from all around the
world. In accordance with these studies, it is emphasized that it cannot be
mentioned about any single corporate governance model which is valid for all
countries. Thus, this study aims to research the relationship between corporate
governance and performance of insurance firms. Data used in this study is derived
from seven insurance firms listed on Borsa İstanbul (BİST) and it is limited to
2005-2011 periods. The effects of corporate governance on performance of
insurance firms are analyzed by multiple regression method. In the study, Return on
Equity (ROE) is used as performance indicator of insurance firms, namely the
dependent variable. And insurance firms’ size of board of directors, free float rate,
CEO duality, the block holder ratio, number of owners and total assets have been
used as independent variables. The results of the analysis have proven a positive
relation between ROE and free float rate, CEO duality and total assets.
Keywords: Corporate Governance, Firm Performance, Insurance Firms.
Introduction
The most used definition about the corporate governance is “Corporate governance deals
with the ways in which the suppliers of finance to corporations assure themselves of
getting a return on their investment” by Shleifer and Vishny (1997: 737)
Corporate governance aims to manage in a way which maximizes the profits and benefits
of corporate shareholders. It has the most important role to gain trust of investors and the
public (Pamukçu, 2011: 134).
Corporate governance gives investors a power to prevent CEO and board of directors to
expropriate all corporations’ assets. Corporate governance can be summarized in one word
as a control (Kula, 2006).
Maher and Andersson (1999) referred that there is an effect of corporate governance on
corporate and economic performance. Corporate governance both influences the progress
and processing of capital markets and puts forward powerful impact on resource allocation.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Corporate governance, which is a significant framework condition, also impresses
industrial competitiveness and economies of member countries in the period of high capital
mobility and rapid globalization (Maher and Andersson, 1999). In the literature there are
many studies that researched the effects of corporate governance on corporate
performance, especially for developed markets. Researchers stated that fine governance
applications result in the enhancements of economic value added, higher productivity and
reduce the risk of systematic financial failure. However, there is no sufficient research for
emerging markets, thus researching corporate governance in emerging markets is a fastgrowing area (Maher and Andersson, 1999).
Corporate governance cause to change business management philosophy in the field of
information systems and accounting system (Aysan, 2007).
There are studies about the relationship between corporate governance and firm
performance in the literature. But the originality of this paper comes from assumption that
it is the pioneer study that examined how corporate governance effects the performance of
insurance firms for Turkey.
This study aims to analyze the effects of corporate governance on the performance of
insurance firms. The originality of this paper with this purpose, a sample has been
constituted by using financial data of 7 insurance firms traded in Borsa İstanbul (BIST) for
the period of 2005-2011. The effects of corporate governance on the performance of
insurance firms are analyzed by multiple regression method. In the study, Return on Equity
(ROE) is used as performance indicator of insurance firms, namely the dependent variable.
And insurance firms’ size of board of directors, free float rate, CEO duality, the block
holder ratio, number of owners and total assets have been used as independent variables.
The study consists of five sections. In the second section that follows the introduction part,
we summarize academic studies that measure the relationship between corporate
governance and firm performance. The third section describes the methodology and the
model of the study by introducing dependent and independent variables. The fourth chapter
covers the results of multiple regression models. And in the last section we conducted an
overall assessment of the research.
The Literature Review
Drobetz, Schillhofer and Zimmermann (2003) examine the relationship between corporate
governance and firm performance in Germany. Tobin’s Q and market-to-book ratio
(MTBR) are used as firm valuation measures. According to the results of the empirical
study there is a strong and a significant positive relationship between the quality of firmlevel corporate governance and firm valuation.
Beiner et. al. (2004) analyzed the relationship between corporate governance and firm
valuation for Switzerland. The results of study show that corporate governance index
(CGI), board size and shareholdings of officers and directors have a statistically significant
effect on firm valuation. Beiner et. al. (2004) stated that the positive relationship between
firm-level corporate governance and Tobin’s Q.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Wu and Xu (2005) investigated corporate financing decisions and corporate governance
effects on the firm value. Findings of the study are consistent with major corporate
governance theories explaining financing decisions’ roles in a more competitive financial
market.
Chhaochharia and Grinstein (2007) founded that the corporate governance rules (SarbanesOxley Act) had a significant effect on firm value.
Javed and Iqbal (2007) analyzed the relationship between corporate governance and firm
value for the Karachi Stock Market, Pakistan. The sample of 50 firms is selected for the
year 2003, 2004 and 2005 for the empirical study. The Tobin’s q, corporate governance
index (CGI)-board composition (board), ownership and shareholdings (share) and
disclosure, transparency and auditing (disc.); and size (in assets), leverage (debt/total asset
ratio) and growth (average sale growth) are used in estimation. According to the results of
the study a positive and significant relation has been found between the quality of firmlevel corporate governance and firm performance.
Toraman and Abdioğlu (2008) investigated weak and strong corporate governance
practices of Borsa Istanbul (BIST) corporate governance index companies. In this respect
rating reports had been investigated. Study results shows that the most powerful corporate
governance practices are observed at the stakeholders section and the weakest are at the
board of directors section of the guide.
Dinç and Abdioğlu (2009) have studied the relationship between corporate governance and
accounting information system with an empirical study for the BIST-100 (Borsa İstanbul100) companies. Dinç and Abdioğlu (2009) points out that there is a strong positive
correlation between accounting information system and corporate governance.
Karamustafa et. al. (2009) investigated the relationship between corporate governance and
corporate performance by analyzing Corporate Governance Index of 8 firms listed in BIST
(Borsa İstanbul). They used both pre- and post-indexed the firms’ data. They treated
current ratio, asset turnover, ROA, profit capital ratio, net profit margin, operating profit
margin, debt ratio and financial leverage ratio as financial performance indicators of firms.
They founded that there is statistical difference for asset turnover, ROA, and profit capital
ratio between pre- and post-index periods.
Najjar (2012) in his study examines the effect of corporate governance mechanisms on the
firm’s performance of the insurance industry in Bahrain. A sample of five insurance
companies listed on Bahrain Stock Exchange (BSE) has been used for the period of 20052010. The Pooled Least Squares method is used for the empirical study. Board size, CEO
status, ownership concentration, firm size, industry performance, employees, shares traded
is used as the independent variables and ROE is used as a dependent variable. According to
the findings Najjar (2012) stated that in Bahrain there is a significant impact for corporate
governance on the firm’s performance in the insurance industry. No significant impact of
corporate governance has been found expressed by CEO status, ownership concentration,
the number of employees, industry performance and number of shares traded on the firm’s
performance (ROE). But a significant impact has been found for board size, firm size and
number of blocks-holders on firm performance.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Hatunoğlu and Güneş (2012) studied about the effects of the corporate governance
practices on accounting information system based on new Turkish Commercial Code.
Methodology
The present study aims to analyze the influence of corporate governance on insurance
firms' performance. With this purpose in mind, a sample has been constituted by using
financial data of 7 insurance firms traded in Borsa İstanbul (BIST) in the years of 20052011. All data utilized in the study have been obtained from the official web site of Borsa
İstanbul (BIST)1. Multiple regression and descriptive statistics have been used in empirical
analysis. Durbin-Watson d statistic has been used to test if there is an autocorrelation of
first degree between the error terms of the sample. Additionally, variance inflation factors
(VIF) method has been used to determine multicollinearity. One dependent variable (ROE)
and six independent variables (BOARDSIZE, FFRATE, DUALITY, BLOCKHOLDERS,
OWNERSHIP and SIZE) have been used in the multiple regression models. Dependent and
independent variables used in the study are as below.
Table 1: Descriptions of Variables Used in Analysis
Variables Description
Dependent Variables
Return on Equity (ROE)
Independent Variables
The Size of the Board of Directors
(BOARDSIZE)
Free Float Rate (FFRATE)
Ceo Duality (DUALITY)
Structure of Ownership
(BLOCKHOLDERS)
Number of Owners (OWNERSHIP)
Size of firm (SIZE)
Variables Description
The ratio of net profit after tax to total equity capital
It shows the total number of members in board of
directors.
It is the rate of free float of the business.
The cases in which CEO is the chairman of the board of
directors=1 other cases=0
The ratio of blockholder’s stocks to all stocks.
Number of owners of insurance firms
Natural logarithm of total assets
Below regression model and hypotheses have been developed based on dependent and
independent variables introduced in Table 1 as well as considering the studies of Najjar
(2012) and Javed and Iqbal (2007) found in literature.
Model: (ROE)it= βit+ β2 BOARDSIZE it + β3 FFRATE
BLOCKHOLDERS it + β6 OWNERSHIP+ β7 SIZE +eit
H1: There is significant impact for board size on ROE.
H2: There is significant impact for free float rate on ROE.
H3: There is significant impact for Ceo duality on ROE.
1
www.borsaistanbul.com
4
it
+ β4 DUALITY it+ β5
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
H4: There is significant impact for blockholders on ROE
H5: There is significant impact for ownership concentration on ROE
H6: There is significant impact for firm size on ROE
Table 2 shows the results of descriptive statistics concerning dependent and independent
variables used in empirical analyses. As shown in Table 1, average return on equity (ROE)
of the firms listed in BIST and reviewed in scope of the analysis is calculated as -0.7%.
Additionally, the values for insurance firms’ board of directors’ size (BOARDSIZE), their
free float rate (FFRATE), the ratio of block holder’s stocks to all stocks
(BLOCKHOLDERS) and number of owners (OWNERSHIP) have been determined as 7.57;
22.37; 61.26 and 3.14 respectively.
Table 2 Descriptive Statistics
Variables
Minumum
Maximum
Mean
St. Dv.
Roe
Number Of
Observations
49
-1,34
0,36
-0,007
0,30
Boardsize
Ffrate
49
49
5
1,34
14
41
7,57
22,37
1,58
1,45
Duality
49
0
1
0,29
0,45
Blockholders
49
34,22
98,66
61,26
2,05
Ownership
49
2
5
3,14
1,12
Size
49
22,45
18,68
20,53
1,01
Findings
Table 3 shows multiple regression analysis results indicating the relation between
performance of insurance firms and corporate governance related to above developed
model.
Table 3 Results of Regression Analysis
MODEL
ROE
Constant
BOARDSIZE
FFRATE
DUALITY
BLOCKHOLDERS
OWNERSHIP
SIZE
F-Statistic
Adjusted R2
DurbinWatson
Unstandardized
Coefficients
B
Standart
Error
-2,497
,553
,004
,017
,009
,004
,209
,055
,004
,003
,037
,032
,090
,029
Standardized
Coefficients
Beta
,023
,445
,315
,247
,140
,303
t
-4,51
,259
2,232
3,821
1,316
1,169
3,087
7,285
0,162
1,745
Sig.
,000
,796
,027
,000
,190
,244
,002
***, ** and * indicate significance at the level of 1%, 5% and 10% respectively
5
Collinearity Statistics
Tolerance
VIF
,547
,108
,634
,122
,299
,445
1,828
9,233
1,578
8,219
3,342
2,246
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
According to Table 4, the results of regression model may be shown mathematically as
below:
Model : (ROE)it= βit+ (,023)BOARDSIZE it + (,445)FFRATE it + (,315)DUALITY it+
(,247)BLOCKHOLDERS it + (,140)OWNERSHIP+ (,303)SIZE +eit
When Model 1 is analyzed, independent variables of FFRATE, DUALITY and SIZE are
observed to influence insurance firms’ performance (ROA). A positive relation has been
found between free float rate (FFRATE), Ceo duality (DUALITY) and total assets (SIZE)
and performance (ROE) of the insurance firms. In other words performance increases as
free float rate and total assets of the insurance firm increase. In addition to this, return on
equity rate of insurance firms have been observed to increase in cases in which general
manager is also chairman of the board of directors. A positive and statistically
insignificant relationship has been determined between insurance firms’ financial
performances and other independent variables, namely the size of board of directors
(BOARDSIZE), the ratio of block holder’s stocks to all stocks (BLOCKHOLDERS) and
number of owners (OWNERSHIP). Although BLOCKHOLDERS and OWNERSHIP did not
have a significant relation with the performance of insurance firms, the positive quality of
this relation (β= 0,247 and 0,140) may be considered as an important finding. In
conclusion, H2, H3 and H6 hypotheses are accepted while H1, H4 andH5 hypotheses are
refuted.
Durbin-Watson d statistics have been used in the model to test if there is autocorrelation of
the first degree. Durbin-Watson d statistics usually show no autocorrelation around 1.5 and
2.5 (Kalaycı, 2009: 267). Variance Inflation Factor (VIF) has been used to test
multicollinearity and to support regression model’s results. Other method used to
determine multicollinearity problem is tolerance value of the variables. In cases where VIF
value is under 10 and tolerance value is not very close to 0, model is considered to be free
from multicollinearity problem (Gujarati, 1995). All three models have pretty good VIF
and tolerance values. There are no multicollinearity problems and autocorrelation in the
model and this shows soundness and reliability of the model.
Findings
The present study aims to analyze the influence of corporate governance on insurance
firms' performance. With this purpose in mind, a sample has been constituted by using
financial data of 7 insurance firms traded in Borsa İstanbul (BIST) in the years of 20052011. In the study, Return on Equity (ROE) is used as performance indicator of insurance
firms, namely the dependent variable. And insurance firms’ sizes of board of directors,
their free float rates, CEO duality, the block holder ratio, number of owners and total assets
have been used as independent variables.
The results of the analysis have proven a positive relation between ROE and free float rate,
CEO duality and total assets. . In other words performance increases as free float rate and
total assets of the insurance firm increase. In addition to this, return on equity rate of
insurance firms have been observed to increase in cases in which general manager is also
chairman of the board of directors. A positive and statistically insignificant relationship
has been determined between insurance firms’ financial performances and other
independent variables, namely the size of board of directors (BOARDSIZE), the ratio of
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
block holder’s stocks to all stocks (BLOCKHOLDERS) and number of owners
(OWNERSHIP). Although BLOCKHOLDERS and OWNERSHIP did not have a significant
relation with the performance of insurance firms, the positive quality of this relation (β=
0,247 and 0,140) may be considered as an important finding. In conclusion, H2, H3 and H6
hypotheses are accepted while H1, H4 andH5 hypotheses are refuted.
References
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Beiner, Stefan; Drobetz, Wolfgang; Schmid, Markus M.; Zimmermann, Heinz (2004) “An
Integrated Framework of Corporate Governance and Firm Valuation
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(ECGI) Working Paper Series
in Finance, Working Paper No:
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Chhaochharia, Vidhi and Grinstein, Yaniv (2007) “Corporate Governance and Firm Value:
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No. 4 (August 2007), pp 1789-1825.
Dinç, Engin and Abdioğlu, Hasan (2009) “İşletmelerde Kurumsal Yönetim anlayışı ve
Muhasebe Bilgi Sistemi İlişkisi: İMKB-100 Şirketleri Üzerine Ampirik Bir
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Kula, Veysel (2006) “Kurumsal Yönetim, Hissedarların Korunması Uygulamarı ve
Türkiye Örneği”
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8
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The Relationship between Corporate Governance and Performance of Insurance Firms: Evidence from Turkey
Author
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DOGAN, Mesut
BILGE ELITAS, Leyli
NACAR, Ramazan
Abstract
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There are many studies in the field of corporate governance from all around the world. In accordance with these studies, it is emphasized that it cannot be mentioned about any single corporate governance model which is valid for all countries. Thus, this study aims to research the relationship between corporate governance and performance of insurance firms. Data used in this study is derived from seven insurance firms listed on İstanbul Stock Exchange (ISE) and it is limited to 2005-2011 periods. The effects of corporate governance on performance of insurance firms are analyzed by correlation and multiple regression analysis. In the study, Return on Asset (ROA) and Return on Equity (ROE) are used as performance indicators of insurance firms, namely the dependent variables. The variables such as number of employees, size of assets, free float rate, size of board of directors, number of independent members and CEO duality of insurance firms are used as corporate governance indicators, namely the independent variables. According to the hypotheses developed, the relationships between corporate governance and performance of insurance firms will be analyzed and findings will be reported. Keywords: Corporate Governance İnsurance Companies Firm Performance.
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International Burch University
Date
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2013-05-10
Keywords
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ISSN 978-9958-834-23-3
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International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
The Effect of Degree of CEO Turnover on Firm
Performance in High-tech vs. Low-tech Firms: Evidence
from Turkey
Mesut Doğan
Afyon Kocatepe University, Afyon, Turkey
mesutdogan@aku.edu.tr
Veysel Ağca
Afyon Kocatepe University, Afyon, Turkey
agca@aku.edu.tr
The main responsibility of Chief Executive Officer (CEO) is to form and
implement strategic goals, policies and plans of the firms. Researchers
showed that the change of CEO who is on the top position of the
organization has positive or negative impacts on firm performance. The
decision of CEO’s change and who will be the new CEO is an extremely
important issue especially for the firms. The change of CEO in the firms is
carried out in two ways. The first is an external mandatory change
occurred as a result of deterioration of their financial performance due to
economic crisis, intense competition and other compelling reasons. In this
case, there are performance improvements expectations by changing the
CEO with identified a new and better strategies. The second is an internal
voluntary change that occurs when the CEO resigns because of better
career expectations and opportunities. In this case, board of directors
often selects a new CEO from among the members of the board of the
directors who knows well firm’s current valid long-term strategies goals,
policies and strategies. As result of this change, the new CEO does not
major changes in the firm. Thus, firms generally do not face a bad
performance.
In the literature, It is not yet seen any study which measures the impact of
the degree of CEO turnover on the firm performance in Turkey. In the
international literature, factors that determine the rate of CEO turnover
have not been examined by differentiating the high-tech and low-tech
firms yet. In this study, it is primarily aimed to determine the effect of the
CEO turnover rate on the firm financial performance in the 175 firms
registered and traded in the İstanbul Stock Exchange (ISE) between the
years 2005-2011. It is secondly aimed to find out if there are differences in
terms of the affects of CEO turnover rate on financial performance in the
203
�International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
high-tech and low-tech firms. The degree of CEO turnover is used as the
dependent variable in this study. On the other hand, Return on Assets
(ROA) Return on Equity (ROE) and Tobin’s q(Q) are used as performance
indicators or measures. Other independent variables are firms’ sales, total
assets, leverage ratio and liquidity level. Hypotheses developed will be
tested by analysis examining the interactions between the degree of CEO
turnover and financial performance indicators, leverage and liquidity
ratios. In addition, factors that effect CEO turnover rate will be determined
in the high-tech and low-tech firms and then similarities and differences
among these firms will be exposed.
Keywords: Firm Performance, Ceo Turnover, Turkey, ROA, ROE.
204
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Text
International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
The Effects of CEO Turnover on Firm Performance in High-Tech vs. LowTech Firms: Evidence from Turkey
Mesut Doğan
Afyon Kocatepe Üniversitesi, Afyonkarahisar, Turkey
mesutdogan@aku.edu.tr
Veysel Ağca
Afyon Kocatepe Üniversitesi, Afyonkarahisar, Turkey
agca@aku.edu.tr
Abstract
The main responsibility of Chief Executive Officer (CEO) is to form and implement
strategic goals, policies and plans of the firms. Researchers showed that the change
of CEO who is on the top position of the organization has positive or negative
impacts on firm performance.In the literature, It is not yet seen any study which
measures the impact of the of CEO turnover on the firm performance in Turkey. In
the international literature, factors that determine CEO turnover have not been
examined by differentiating the high-tech and low-tech firms yet. The present
research aims at determining factors that play a role turnover of CEO in 173 firms
that are traded in Istanbul Stock Exchange (ISE) in the period of 2005-2011. In
addition, firms in the research have been divided in two groups and these two
groups have been analyzed in terms of the difference of the effect of CEO change
rate on firm performance. The results of the analysis showed that decrease in the
performance indicators of firms causes CEO turnover. Accordingly, the effects of
CEO turnover on firm performance have been found to be higher in high-tech firms
than low-tech firms.
Key words: Key Words: Firm Performance, Financial Indicators, CEO Turnover,
High and Low Technology Firms
Introduction
Main responsibility of CEO is to form and implement effective strategies in order to
achieve goals and objectives determined in the direction of the firm’s vision and mission.
Researchers showed that the change of CEO who is on the top position of the organization
has positive or negative impacts on firm performance. The decision of CEO’s change and
who will be the new CEO is an extremely important issue especially for the firms. The
change of CEO in the firms is carried out in two ways. The first is an external mandatory
change occurred as a result of deterioration of their financial performance due to economic
crisis, intense competition and other compelling reasons. In this case, there are
performance improvements expectations by changing the CEO with identified a new and
better strategies. The second is an internal voluntary change that occurs when the CEO
resigns because of better career expectations and opportunities. In this case, board of
directors often selects a new CEO from among the members of the board of the directors
who knows well firm’s current valid long-term strategies goals, policies and strategies. As
result of this change, the new CEO does not major changes in the firm. Thus, firms
generally do not face a bad performance (Lindrianasari and Hartono, 2012: 207).
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
High tech means the most advanced and developed technology and expresses the change
happening in time. High tech is used to define current technologies rather than the past or
future technologies. Therefore, the products considered to be high tech in 1960s, are
considered to be standard or even low tech products today. Today, there are more high tech
sector’s depending on the intensity of technology used when compared with 20-30 years
before (Akgün and Polat, 2011). Sectors using high technologies are sectors such as
Energy, Telecommunication, Chemicals, Medical and Computers. On the other hand, low
technology doesn’t require an intense technology to be used in the production process or
production of service and its investment costs are lower compared to high technology
sectors. Sectors such as Textile, Food Production or Concrete Production are considered to
be low technology sectors. Majority of the firms being traded in ISE belongs to low
technology group.
No study measuring the influence of CEO turnover on firm performance in Turkish Capital
Market has been encountered during the literature review. In international literature, on
the other hand, no study analyzed the effect of CEO turnover on firms separately
depending on their being in high and low tech sectors. The present study is expected to
contribute both national and international literatures. Therefore this study is taken to be
quite important.
The present research aims at determining factors that play a role in the change of CEO in
173 firms that are traded in Istanbul Stock Exchange (ISE) in the period of 2005-2011. In
addition, firms in the research have been divided in two groups and these two groups have
been analyzed in terms of the difference of the effect of CEO change rate on firm
performance. The degree of CEO turnover is used as the dependent variable in this study.
On the other hand, Return on Assets (ROA), Return on Equity (ROE) and Tobin’s q(Q) are
used as performance indicators or measures. Other independent variables are firms’ sales,
total assets, leverage ratio and liquidity level
This study consists of five sections. Second section found right after introduction
summarizes academic studies measuring the relation between CEO change rate and firm
performance.
Third section consists of introduction of dependent and independent
variables and explanation of methodology and sampling of the study. In addition,
regression model has been explained and hypotheses have been developed in this section.
Forth section contains the empirical results of analysis. And a general assessment of the
study has been put forth in the last section.
Literature Review
There are two ways for a firm to change CEO. First one consists of the obligatory change
of CEO depending on external influences due to worsening of firm’s performance. Second
one consists of the resignation of CEO due to better career opportunities and this is a
voluntary change. Majority of the studies found in literature review show that CEO
decisions and the change of CEO are influential factors on firm’s financial performance.
Writers such as Helmich (1974), Davidson et al. (1993) have argued that CEO change is
effecting firms' performance positively while Grusky (1964), Allen et al. (1979), Carroll
(1984), Beatty and Zajac (1987), Haveman (1993) have argued that CEO change is
effecting firms’ performance in a negative way. On the other hand, Boeker (1992) have
argued that CEO change is not effective at all on firm’s performance (Lindrianasari and
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Hartono, 2012, p. 212). Other than these studies, Kesner and Sebora (1994) have used
CEO turnover as a dependent variable. The results of their study showed that the higher
turnover CEO results in lower firm performance. Similarly Virany et al. (1992), Shen
(2000) have put forth a negative relation between ROA and CEO change rate. Deond and
Park (1999), Engel et al. (2003) and Defond and Hung (2004) have determined a negative
relation between profits before interests and taxes and CEO turnover. In contrast, writers
such as Cannella and Lubatkin (1993), Zazac and Westphal (1996) have found weak
relations between CEO turnover and firm performance.
Other than the studies summarized above, Smith et al. (2008) who have analyzed the
relation between control variables and CEO change rate have found that the increase in
total assets causes CEO turnover to slow down, while the increase in capital adequacy ratio
(equities/total assets) causes an increase in the probability of CEO change. Conyon and He
(2008) have analyzed the relation between CEO turnover and firm performance in firms
operating in China. 1200 Chinese firms operating in the period of 1999-2006 have been
included to their research. According to the findings of the study, a very strong and
negative relation has been found between CEO turnover and firm performance. Similarly
Lindrianasari and Hartono (2012) have studied the relation between CEO turnover and
firm performance for the firms operating in Indonesia. Logistic regression analysis has
been used in the study in which data belonging to the period of 1998-2006 has been
included. According to the results of the study, negative relations between CEO turnover
and Interest and Profit Before, ROA, ROE, total assets, sales and debt-equity ratio while
there was a positive relation between current ratio and CEO turnover. Similarly Rachpradit
et al. (2012) have studied the effect of CEO turnover and the structure of board of directors
and partnership on firm performance in the firms operating in Thailand outside of the
financial sector. According to the results of the analysis, probability of CEO change is
much lower in cases in which firms are run by families, CEO being a member of the family
or increase in the member number of board of directors. In addition, the sensitivity of
CEO turnover on firm performance is proven to be much higher in cases in which CEO
duality and decrease in the member number of independent board of directors.
Additionally, CEO turnover has proven not to be influential on firm performance in cases
in which CEO has reached the age of retirement.
Methodology
The present research aims at determining factors that play a role turnover of CEO in 173
firms that are traded in Istanbul Stock Exchange (ISE) in the period of 2005-2011. In
addition, firms in the research have been divided in two groups and these two groups have
been analyzed in terms of the difference of the effect of CEO change rate on firm
performance. Logistic regression and t test methods have been used in empirical analysis.
In the present study, firms which have changed CEOs in the period of 2008-2011 have
been determined and factors to cause these changes have been determined. The dependent
variable in the present study is CEO turnover. The cases in which a CEO change happens
are considered as 1, others are taken as 0. Sectors such as Energy, Telecommunication,
Chemicals and Computer are considered as high tech and others belong to low tech. Table
1 shows dependent and independent variables used in the present study.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Table 1: Descriptions of Variables Used in Analysis
Variables
Description
Dependent Variables ( 0, 1)
Ceo Turnover (TURNOVER)
Independent Variables
1= turnover , 0= otherwise
Return on Assets (ROA)
The ratio of net profit after tax to total assets
Return on Equity (ROE)
Tobin’s q (Q)
The ratio of net profit after tax to total equity
capital
Market value to the book value of total assets.
Size of firm 2 (SALES)
Natural logarithm of total sales
Size of firm 1 (ASSETS)
Natural logarithm of total assets
Leverage (DEPT)
The ratio of total liabilities to total assets
Liquidity (LIQ)
The ratio of current assets to current liabilities
Below regression model has been developed using the dependent and independent
variables introduced in Table 1 and based on the studies of Defond and Hung (2004);
Conyon and He (2008); Smith et al. (2008); Rachpradit et al. (2012); Lindrianasari and
Hartono (2012).
TURNOVER (1,0)= βit+ β2 ROAit + β3 ROEit + β4 Qit+ β5 LIQit + β6 ASSETSit+ β7
SALESit+ β8 DEBTit+ eit
The effect of CEO turnover on firm performance is thought to be higher in high technology
firms. Since core competitiveness of these firms for the market and their customers are
based on radical innovations. As long as this firms gains sustainable competitive
advantage with these innovations, there will not experience an obligatory CEO change.
The expectation from an obligatory CEO change in these firms is making innovations
based on high technology that provides gains over sector average. These innovations
which have a high added value for customers are reflected as high performance. This is
provided faster compared to low tech firms. Therefore, the expectation of high
performance in the change of CEO is considered to be higher in high technology firms. So
main hypothesis of this study is:
H1: The effects of CEO turnover on firm performance will be higher for high technology
firms than low technology firms.
Other hypotheses on performance indicators which have a determining effect on CEO
turnover are shown below.
H2: ROA has a negative relation with CEO turnover.
H3: ROE has a negative relation with CEO turnover.
H4: Tobin’s q (Q) has a negative relation with CEO turnover.
H5: Liquidity ratio has a negative relation with CEO turnover.
H6: Total Assets have a negative relation with CEO turnover.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
H7: Sales have a negative relation with CEO turnover.
H8: Debt ratio has a positive relation with CEO turnover.
Findings
Table 2 shows the results of logistic regression analysis related to the model developed
above. Factors causing CEO change have been determined using financial data of 20082011.
Table 2: Results of Logistic Regression Analysis
Variables
B
Wald
Sig.
Exp(B)
Constant
-1,863
20,352
0,000
0,080
ROA
-1,945
13,250
0,008
1,234
ROE
-,600
13,652
0,009
0,945
Tobin’s (Q)
-1,122
15,005
0,005
1,052
LIQ
0,072
10,287
0,085
1,072
ASSETS
-0,092
11,350
0,042
1,096
SALES
-0,078
12,665
0,023
1,081
DEPT
-1,309
14,354
0,080
3,703
Observation
692
N. R Square
,262
When results from Table 2 are evaluated, the independent variables of ROA, ROE, Q, LIQ,
ASSETS, SALES and DEPT are observed to be influencing CEO turnover which is the
dependent variable. CEO turnover of firms increases with the decrease of asset
profitability, equity profitability, Tobin’s Q rate, total assets, sales and liabilities. In other
words, the decrease in accounting and market based performance indicators of firms,
results with CEO change. In addition, there is a positive relation between liquidity rate and
CEO turnover. In other words, higher ability to pay (solvency) results with higher CEO
turnover. As a result hypotheses H2, H3, H4, H6 and H7 are accepted and H5 and H8
hypotheses are rejected.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Table 3: T-Test
Table 3 shows the results of t test concerning dependent and independent variables used in
analysis. In Table 3, firms are grouped as the ones which have not changed CEOs and the
ones which have changed CEOs, so the two groups have been analyzed to determine
whether they have a difference in performance or not.
102 firms have changed CEOs and 71 firms haven’t changed CEOs of the firms which
were included in the analysis. Between the years 2008-2011, mean ROA, ROE and
Tobin’s Q rates of the firms whose CEO’s didn’t change are calculated respectively 3.2%;
4.8% and 2.87, firms whose CEO’s did change calculated 2.8%; -227% and 2.16. The
firms which have not changed CEOs during the mentioned years have higher performance
indicators both in terms of accounting and market. In addition, total assets and total sales
of the firms which have not changed CEOs are higher compared to the firms which have
changed CEOs and their short term solvencies and capital adequacy ratio are lower.
Table 4: T-Test High and Low Tech Firms
Table 4 shows the results of t test concerning dependent and independent variables of the
firms which have changed CEOs. Firms are divided in two in Table 4 as high and low
technologies and these two groups have been analyzed in terms of their difference in CEO
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
turnover. 122 firms are considered to be low technology and 51 are considered to be high
technology from 173 firms being traded in ISE. 74 firms from low tech group have
changed their CEOs, 28 firms from high tech group have changed their CEOs. Between
2008 and 2011, mean ROA, ROE and Tobin’s Q rates of high tech firms were 3.8%; 0.1% and 2.38 respectively, the mentioned rates for low tech firms were calculated as
2.4%; -4.7% and 1.56. Even though CEOs of the high and low tech firms have been
changed in those years, high technology firms still have higher performance indicators
both in terms of accounting and market. In other words, high technology firms have a
higher CEO turnover in the cases of decreasing of accounting and market based
performance indicators by low-tech firms. In addition to this, total assets and sales of high
tech firms are higher than low tech firms. In other words, a faster reaction is observed
when high tech firms’ sales and assets decrease. However, low tech firms have higher
liquidity rate (LIQ) and capital adequacy (DEPT) compared to high tech firms. Since the
effect of CEO turnover on the firm’s performance is higher in high tech firms, H1
hypothesis is accepted.
General Assessment
The present research aims at determining factors that play a role in turnover of CEO in 173
firms that are traded in Istanbul Stock Exchange (ISE) in the period of 2005-2011. In
addition, firms in the research have been divided in two groups and these two groups have
been analyzed in terms of the difference of the effect of CEO change rate on firm
performance. The present study analyzes the interactions between liquidity level, capital
adequacy, total assets, sales, accounting and market based performance indicators and
CEO turnover.
There are two ways for a firm to change CEO. First one consists of the obligatory change
of CEO depending on external influences due to worsening of firm’s performance. Second
one consists of the resignation of CEO due to better career opportunities and this is a
voluntary change. The results of analysis show that CEO turnover increases when asset
profitability, equity profitability, Tobin’s Q rate, total assets, sales and liabilities decrease.
In other words, the decrease in accounting and market based performance indicators of
firms, results with CEO change. There is a positive relation between liquidity rate which is
another control variable and CEO turnover. In other words, higher solvency results with
higher CEO turnover. So, CEO change seen in firms traded in ISE happened as a result of
worsening of financial performance.
102 firms have changed CEOs and 71 firms haven’t changed CEOs of the firms which
were included in the analysis. Between the years 2008-2011, mean ROA, ROE and
Tobin’s Q rates of the firms whose CEO’s didn’t change are calculated respectively 3.2%;
4.8% and 2.87, firms whose CEO’s did change calculated 2.8%; -227% and 2.16. The
firms which have not changed CEOs during the mentioned years have higher performance
indicators both in terms of accounting and market.
122 firms are considered to be low tech and 51 are considered to be high tech from 173
firms being traded in ISE. 74 firms from low tech group have changed their CEOs, 28
firms from high tech group have changed their CEOs. Between 2008 and 2011, mean
ROA, ROE and Tobin’s Q rates of high tech firms were 3.8%; -0,1% and 2.38
respectively, the mentioned rates for low tech firms were calculated as 2.4%; -4.7% and
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
1.56. Even though CEOs of the high and low tech firms have been changed in those years,
they still have higher performance indicators both in terms of accounting and market. In
other words, high tech firms have a higher CEO turnover in cases in which accounting and
market based performance indicators decrease. In addition to this, total assets and sales of
high tech firms are higher than low tech firms. In other words, a faster reaction is observed
when high tech firms’ sales and assets decrease. However, low tech firms have higher
liquidity rate (LIQ) and capital adequacy (DEPT) compared to high tech firms.
Additionally, high liquidity level in a firm doesn’t necessarily show its efficiency and
effectiveness. For firms, it is important to keep liquidity level at minimum and to have
profitability at maximum. Moreover, it is important for firms to establish a balance
between costs and risks, decrease capital costs and raising their market value by doing so.
So, the effect of CEO turnover on firm performance is higher in high tech firms. Since
intense competition in the high tech sector drives them to be more creative and innovative
in terms of their products in order to meet rapidly changing and developing demands,
expectations and preferences of the customers. These products and services, which cannot
be reproduced and replaced, and which are based on core capabilities with a high added
value, take effect faster on performance. With CEO turnover, the success of providing
creative and innovative, high quality products are reflected more and quickly in high tech
firms compared to low tech firms.
References
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Dalgalanma Ekseninde Yüksek Teknoloji Pazarlaması: Kavramsal Bir Çalışma.
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Performance: A Recalcitrant Problem Revisited. Administrative Science Quarterly,
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Conyon, M., & He, L. (2008). CEO Turnover and Firm Performance in China’s Listed
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Davidson, W.N., Worrell, D., & Dutia, D. (1993). The Stock Market Effects of CEO
Succession in Bankrupt?. Journal of Management, 19(3), 517-533.
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Defond, M.L., & Hung, M. (2004). Investor Protection And Corporate Governance:
Evidence From Worldwide CEO Turnover. Journal of Accounting Research, 42(2),
269-312.
Deond, M.L., & Park, C.W. (1999). The effect of Competition on CEO Turnover. Journal
of
Accounting and Economics, Vol. 27, 35-56.
Engel, E., Hayes, R.M., & Wang, X. (2003). CEO Turnover And Properties Of Accounting
Information. Journal of Accounting and Economics, Vol. 36, 197-226.
Gamson, W., & Scotch, N. (1964). Scapegoating in Baseball. American Journal of
Sociology, Vol. 70, 69-76.
Grusky, O. (1964). Reply to Scapegoating in Baseball”, American Journal of Sociology,
Vol. 70, pp. 72-76.
Haveman, H. (1993). Organizational Size and Change. Administrative Science Quarterly,
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Helmich, D.L. (1974), “Organizational Growth and Succession Patterns. Academy of
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Kesner, I. F., & Sebora, T. C. (1994). Executive Succession: Past, Present and Future”,
Journal of Management, Vol. 20, 327-372.
Lindrianasari, J. H. (2012). Antecedent and consequence factors of CEO turnover in
Indonesia. Management Research Review, 35(3), 206 – 224.
Rachpradit, P., John C.S. T., & Do B. K. (2012). CEO Turnover and Firm Performance,
Evidence from Thailand. Corporate Governance, 12(2), 164 – 178.
Shen, W. (2000). Political Dynamics Within Corporate Upper Echelons and Their İmpacts
on Contender and Outsider CEO Succession. Academy of Management
Proceedings BPS: H1.
Smith, F., Wright, A., & Huo, Y.P. (2008). Scapegoating Only Works If The Herd is Big:
Downsizing, Management Turnover, and Company Turnaround, International
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9
�
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1646
Title
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The Effect of Degree of CEO Turnover on Firm Performance in High-tech vs. Low-tech Firms: Evidence from Turkey
Author
Author
DOGAN, Mesut
AGCA, Veysel
Abstract
A summary of the resource.
The main responsibility of Chief Executive Officer (CEO) is to form and implement strategic goals, policies and plans of the firms. Researchers showed that the change of CEO who is on the top position of the organization has positive or negative impacts on firm performance. The decision of CEO’s change and who will be the new CEO is an extremely important issue especially for the firms. The change of CEO in the firms is carried out in two ways. The first is an external mandatory change occurred as a result of deterioration of their financial performance due to economic crisis, intense competition and other compelling reasons. In this case, there are performance improvements expectations by changing the CEO with identified a new and better strategies. The second is an internal voluntary change that occurs when the CEO resigns because of better career expectations and opportunities. In this case, board of directors often selects a new CEO from among the members of the board of the directors who knows well firm’s current valid long-term strategies goals, policies and strategies. As result of this change, the new CEO does not major changes in the firm. Thus, firms generally do not face a bad performance. In the literature, It is not yet seen any study which measures the impact of the degree of CEO turnover on the firm performance in Turkey. In the international literature, factors that determine the rate of CEO turnover have not been examined by differentiating the high-tech and low-tech firms yet. In this study, it is primarily aimed to determine the effect of the CEO turnover rate on the firm financial performance in the 175 firms registered and traded in the İstanbul Stock Exchange (ISE) between the years 2005-2011. It is secondly aimed to find out if there are differences in terms of the affects of CEO turnover rate on financial performance in the high-tech and low-tech firms. The degree of CEO turnover is used as the dependent variable in this study. On the other hand, Return on Assets (ROA) Return on Equity (ROE) and Tobin’s q(Q) are used as performance indicators or measures. Other independent variables are firms’ sales, total assets, leverage ratio and liquidity level. Hypotheses developed will be tested by analysis examining the interactions between the degree of CEO turnover and financial performance indicators, leverage and liquidity ratios. In addition, factors that effect CEO turnover rate will be determined in the high-tech and low-tech firms and then similarities and differences among these firms will be exposed. Keywords: Firm Performance, Ceo Turnover, Turkey, ROA, ROE.
Publisher
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International Burch University
Date
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2013-05-10
Keywords
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Article
PeerReviewed
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ISSN 978-9958-834-23-3
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https://omeka.ibu.edu.ba/files/original/2e2769b8a6410ccab0b580c6edd067c3.pdf
1a9056ea80fd426f9950845452d2d659
PDF Text
Text
International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
Police Officers Are in Burnout Syndrome? : An Applied
Research in Nazilli Police Organization
Hulusi Doğan
Adnan Menderes University, Turkey
hulusidogan@gmail.com
Hüseyin Gül
Adnan Menderes University, Turkey
huseyingul@adu.edu.tr
Şeker Güven
Celal Bayar University, Turkey
gdseker@hotmail.com
The aim of this study is to give general information about the history of
Turkish National Police Organization and to measure police officers’
burnout level by an empirical research in Nazilli Police Organization. In this
context, the study includes two parts. The first part examines the history
and organization structure of Turkish National Police Organization. The
second part includes a research measuring burnout level of police officers
working in Nazilli Police Organization. The research (questionnaire) is
designed so as to test the following alternative hypotheses:
H1: There are differences between police officers’ service unit (narcotic,
terror, traffic etc.) and burnout level.
H2: There are differences between police officers’ sexuality and burnout
level.
H3: There are differences between police officers’ vocational experience
and burnout level.
H4: There are differences between police officers’ marital status and
burnout level.
H5: There are differences between police officers’ vocational status and
burnout level.
H6: There are differences between police officers’ educational level and
burnout level.
160
�International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
Maslach Burnout Inventory (MBI) is used to measure police officers’
burnout level in the study. Maslach Burnout Inventory scale is composed
of three dimensions; emotional exhaustion, depersonalization and
personal accomplishment. In other words, MBI scale is composed of 22
items; 9 items for emotional exhaustion, 5 items for depersonalization and
8 items for personal accomplishment. The instrument consisted of these
22 (items) questions are answered on a 1-5 likert scales labeled “strongly
disagree” (1) and “strongly agree” (5). Additionally, our research
questionnaire includes 7 items to determine demographic variables (such
as age, sexuality, vocational experience, marital status, service unit,
vocational status, education level) of police officers. SPSS 20.0 is used for
statistical analysis. T-Test and One Way ANOVA is used to analyze and
assess the differences among police officers in terms of their demographic
variables.
Keywords: Burnout, Police Officers, Emotional Exhaustion.
161
�
Dublin Core
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Extent
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1628
Title
A name given to the resource
Police Officers Are in Burnout Syndrome? : An Applied Research in Nazilli Police Organization
Author
Author
DOGAN, Hulusi
GUL, Huseyin
GUVEN, Seker
Abstract
A summary of the resource.
The aim of this study is to give general information about the history of Turkish National Police Organization and to measure police officers’ burnout level by an empirical research in Nazilli Police Organization. In this context, the study includes two parts. The first part examines the history and organization structure of Turkish National Police Organization. The second part includes a research measuring burnout level of police officers working in Nazilli Police Organization. The research (questionnaire) is designed so as to test the following alternative hypotheses: H1: There are differences between police officers’ service unit (narcotic, terror, traffic etc.) and burnout level. H2: There are differences between police officers’ sexuality and burnout level. H3: There are differences between police officers’ vocational experience and burnout level. H4: There are differences between police officers’ marital status and burnout level. H5: There are differences between police officers’ vocational status and burnout level. H6: There are differences between police officers’ educational level and burnout level. Maslach Burnout Inventory (MBI) is used to measure police officers’ burnout level in the study. Maslach Burnout Inventory scale is composed of three dimensions; emotional exhaustion, depersonalization and personal accomplishment. In other words, MBI scale is composed of 22 items; 9 items for emotional exhaustion, 5 items for depersonalization and 8 items for personal accomplishment. The instrument consisted of these 22 (items) questions are answered on a 1-5 likert scales labeled “strongly disagree” (1) and “strongly agree” (5). Additionally, our research questionnaire includes 7 items to determine demographic variables (such as age, sexuality, vocational experience, marital status, service unit, vocational status, education level) of police officers. SPSS 20.0 is used for statistical analysis. T-Test and One Way ANOVA is used to analyze and assess the differences among police officers in terms of their demographic variables. Keywords: Burnout, Police Officers, Emotional Exhaustion.
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International Burch University
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2013-05-10
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International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
Improvement of Corporate Governance Practices of
İstanbul Stock Exchange (ISE) Corporate Governance
Index Companies
Evren Dilek Sengur
İstanbul University, İstanbul, Turkey
sengur@İstanbul.edu.tr
A series of corporate scandals highlighted the corporate governance issue
all around the world. Like other countries, Turkey has adopted strong
regulatory framework for corporate governance in the last decade. The
purpose of this study is to analyze the improvement in corporate
governance practices of İstanbul Stock Exchange Corporate Governance
Index Companies between the years of 2007 and 2012. With this purpose
corporate governance rating reports of companies were examined. Based
on the examination of corporate governance rating reports; it is observed
that overall corporate governance ratings have been gradually increasing
year by year. Further analysis demonstrates that while stakeholders
section is the most strength side, board of directors is the weakest part of
Corporate Governance Index Companies. Nonetheless, in 2012 a sharp
increase in the ratings of board of directors section was observed thanks to
enactment of new Commercial Code and enforcement of Communiqué
Serial : IV, No:56.
Keywords: Corporate Governance, Corporate Governance Index,
Corporate Governance Rating, İstanbul Stock Exchange, Capital Market
Board of Turkey.
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c1df6bbead45ad1a0dd5623ea5887c31
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ff72614246d5149fb9d97aa07414b757
PDF Text
Text
International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Improvement of Corporate Governance Practices of İstanbul Stock
Exchange (ISE) Corporate Governance Index Companies
Evren Dilek Sengur
İstanbul University, İstanbul, Turkey
sengur@İstanbul.edu.tr
Abstract
A series of corporate scandals highlighted the corporate governance issue all around
the world. Like other countries, Turkey has adopted strong regulatory framework for
corporate governance in the last decade. The purpose of this study is to analyze the
improvement in corporate governance practices of Istanbul Stock Exchange Corporate
Governance Index Companies between the years of 2007 and 2012. With this purpose
corporate governance rating reports of companies were examined. Based on the
examination of corporate governance rating reports; it is observed that overall
corporate governance ratings have been gradually increasing year by year. Further
analysis demonstrates that while stakeholders section is the most strength side, board
of directors is the weakest part of Corporate Governance Index Companies.
Nonetheless, in 2012 a sharp increase in the ratings of board of directors section was
observed thanks to enactment of new Commercial Code and enforcement of
Communiqué Serial : IV, No:56.
Keywords: Corporate Governance, Corporate Governance Index, Corporate
Governance Rating, Istanbul Stock Exchange, Capital Market Board of Turkey.
INTRODUCTION
After a series of corporate scandals, the importance of transparency issues have increased
and corporate governance has became one of the most fundamental themes for business
environment. These developments have fostered widespread belief in the economic
benefits of companies having more responsibility against all beneficiaries including
employees, directors, shareholders, stakeholders, customers, suppliers, and the society as a
whole (Yuksel, 2008). As a consequence of such developments, corporate governance
principles are enacted by many countries to minimize the agencyproblem and ensure that
managers act in the interests of shareholders. In addition to being a potential solution to
principal-agent problem, well defined and functioning corporate governance system helps
a firm to attract investment, raise funds with a low capital cost, strengthen firm
performance, overcome financial crisis more easily and generate long term economic value
for its shareholders.
From the perspective of national development, effective corporate governance system is
also essential for development of equity markets. Additionally, corporate governance leads
a sustainable growth and enables companies to compete effectively in global marketplace
and attract long-term capital to grow their businesses (Ararat and Ugur, 2003).
The purpose of this paper is to analyze the improvements of Istanbul Stock Exchange (ISE)
Corporate Governance Index Companies with respect to compliance with Corporate
Governance Principles of Capital Markets Board of Turkey between 2007 and 2012. In
order to demonstrate the improvement level of compliance, corporate governance rating
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reports of companies which are listed on Corporate Governance Index of Istanbul Stock
Exchange were examined. The analysis comprises corporate governance rating reports
between the years of 2007 and 2012 to monitor the evaluation of corporate governance
practices.
Corporate governance rating reports of Istanbul Stock Exchange (ISE) Corporate
Governance Index Companies have examined by Toraman and Abdioğlu in 2008
(Toraman and Abdioğlu, 2008), however this study is different from previous study by
highlighting the improvements in the compliance degree of companies between 2007 and
2012.
In this study the next section summarizes the literature review, section 2 briefly explains
the development of corporate governance in Turkey, section 3 reviews research
methodology and findings regarding corporate governance practices of ISE Corporate
Governance Index companies. The study ends with summary, concluding remarks and
recommendation for future research.
1. LITERATURE REVIEW
Review of literature on corporate governance in Turkey indicates that some of the previous
studies cover the development of corporate governance in Turkey. (Ararat and Ugur 2003;
Ararat and Yurtoglu 2006; Yuksel 2008; Akdogan and Boyacioğlu 2010; Akdogan and
Akdogan 2011; Akbulak 2011). Furthermore, Arsoy and Crowther (2008) investigated the
extent of convergence of regulations and practice regarding corporate governance between
Turkey and UK. They found that although corporate governance code of Turkey and UK
are similar, the degree of compliance is higher for UK companies. Toraman and Abdioglu
(2008) examined corporate governance rating reports of ISE Corporate Governance Index
companies and they observed most powerful corporate governance practices at the
stakeholders section, and the weakest corporate governance practices at the board of
directors section. Mandacı and Gumus (2010) examined the effects of ownership
concentration and managerial ownership on the profitability and the value of non-financial
firms listed on the Istanbul Stock Exchange (ISE). They found that ownership
concentration has a significantly positive effect on both firm value and profitability, while
managerial ownership has a significant negative effect on firm value. Gurbuz et al. (2010)
evaluated the impact of corporate governance on financial performance of companies in
Turkey. They found that corporate governance practices enhance firm financial
performance. Sakarya (2011) and Ergin (2012) analyzed the relationship between
corporate governance rating and the return on common stocks. Both of the studies
demonstrated that there is a positive correlation between the announcement of a favorable
corporate governance rating score and the associated stock returns. Sengur (2011)
examined whether properly implementation of corporate governance principles make
difference in performance of companies in Turkey. The results of her study showed that
there is no significant difference in performance of Corporate Governance Index
Companies in Turkey when performance is measured in terms of ROA and Tobin Q. In
their study Needles et al. (2012) concluded that Turkish high performance companies
apply superior corporate governance practices in comparison to ordinary Turkish
companies.
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2. DEVELOPMENT OF CORPORATE GOVERNANCE IN TURKEY
In recent macroeconomic restructuring efforts of Turkey, Turkey has been adoptedstrong
regulatory framework for corporate governance in the last decade. As a starting point for
the implementation of best practices in corporate governance, in 2002 Turkish Industry &
Business Association (TUSIAD) published a report entitled “Corporate Governance Code
of Best Practices: Composition and Functioning of the Board of Directors.” Code of best
practices introduced by TUSIAD comprised of voluntary principles with the aim of
providing a guideline for corporations.
Within the scope of its mission, in July 2003 Capital Market Board of Turkey (CMB)
issued the Corporate Governance Principles of Turkey with the purpose of enhancing the
corporate governance regulations for listed companies. CMB principles were established
mainly in accordance with OECD Corporate Governance Principles. Additionally, CMB
took into consideration the particular conditions of Turkey during the preparations stage of
principles. Parallel to OECD principles, CMB Corporate Governance Principles were
revised in 2005. The CMB principles are based on the principle of “comply or explain”. In
other words, the implementation of the principles is optional and companies should
disclose the extent of compliance and explain the reasons why some of the principles are
not adopted. The implementation status of the principles should be disclosed in corporate
governance compliance report that is included in the annual report as a separate section.
In 2003, Corporate Governance Association of Turkey (TKYD) was founded with the aim
of disseminating best practices of corporate governance. Since its foundation, TKYD has
been conducting academic research projects to determine strategic priorities in Turkey with
respect to corporate governance. A research project, “Governance Map of Turkey” was
conducted in 2005 and indicated that boards’ excessive involvement in execution and
insufficientdisclosure are the main issues in Turkish corporate world.
In February 2005 Istanbul Stock Exchange (ISE) published the rules of Corporate
Governance Index. ISE Corporate Governance Index has been active since August 31,
2007 and it aims to measure the price and return performances of ISE-listed companies
with a corporate governance rating of minimum 7 out of 10. The corporate governance
rating is determined by the rating institutions that are approved by CMB.CMB regulates
principles of rating institutions under the Communiqué on Principles Regarding Ratings
and Agencies (Seria: VIII, No: 51). Corporate governance rating of a company is granted
upon the request of these companies and Corporate Governance Rating Reports are
published by the rating agencies.
Four national and one international rating institutions are permitted to rate the corporate
governance practices of the companies in Turkey. These institutions are shown in Table 1.
Table 1
Corporate Governance Rating Institutions
Rating Institutions
National
Turkish Credit Rating
National
Saha Corporate Governance and Credit Rating Services Inc.
National
Kobirate Corporate Governance and Credit Rating Services Inc.
National
JCR Eurasia Rating
International
RiskMetrics Group Inc.
Source:Capital Markets Board of Turkey,
http://www.spk.gov.tr/indexcont.aspx?action=showpage&showmenu=yes&menuid=6&pid=10&subid=1&submenuheade
r=10
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Under Decree Law No. 654 (Official Gazette: October 11, 2011, No:28081) the following
paragraph was added to Capital Market Law in order to extend the functions of Capital
Markets Board of Turkey : “to determine and announce the principles of corporate
governance in the capital market, to oblige the public joint stock companies quoted in the
stock exchange market totally or partially comply with the principles of corporate
governance in accordance with the groups determined by taking (i) the free float rates, (ii)
the number and the quality of these companies’ investors and (iii) the index which
companies are subjected to and their transaction volume in a certain time zone into account
so as to make a contribution to the improvement of investment environment”. With this
paragraph, the Capital Markets Board of Turkey (CMB) has been authorized to determine
corporate governance principles and to oblige the public joint stock companies comply
with the principles.
Capital Market Board published the Communiqué Serial: IV, No: 54 Principles Regarding
Determination and Application of Corporate Governance Principles on 11.10.2011. The
Communiqué introduced the obligation for Istanbul Stock Exchange (ISE) National-30
Index companies (excluding banks) to comply with some of the corporate governance
principles. Afterwards the Communiqué Serial: IV, No: 56 Principles Regarding
Determination and Application of Corporate Governance Principles replacing the
Communiqué Serial: IV, No: 54 was published on 30.12.2011. With this new
Communiqué the scope of application of the previous Communiqué which covered ISE
National-30 Index companies (excluding banks) has been enlarged to include other
companies traded on the Istanbul Stock Exchange. However, companies trading on Watch
List Market and Developing Companies Market are exempted from mandatory
implementation of Corporate Governance Principles.
By the Communiqué Serial: IV, No: 56, the public joint stock companies that are quoted in
the Istanbul Stock Exchange (ISE) were divided systematically into three groups by taking
into account of their market values and the market values of their shares in circulation.
Each categories are required to obey different level of mandatory rules. Under the
Communiqué, Category 1 companies are required to comply with all mandatory Corporate
Governance Principles while Category 2 and Category 3 companies may benefit from
certain exemptions.
The principles of corporate governance that was published by Capital Market Board of
Turkey in 2003 aimed to contribute all joint stock companies in the private and public
sector. Compliance to the principles was not compulsory. Communiqué Serial: IV, No: 56
was published with the aim to expand the application of corporate governance principles
and to oblige the public joint stock companies comply with the principles. Through this
Communiqué, one step forward was taken regarding the approach of “comply or explain”
that has been adopted by Capital Market Board of Turkey since 2003 about corporate
governance.
The provisions of Communiqué Serial: IV, No: 56 are valid for Istanbul Stock Exchange
(ISE) Companies (excluding listed banks) from the date of publication of the Communiqué
on 30.12.2011. For listed banks, Communiqué will be effective on 30.12.2012.
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Two major legislations comprise the legal framework of the Turkish capital markets;
Capital Markets Law (CML) and Turkish Commercial Code. Turkish Commercial Code
basically governs commercial relationships and establishment and governance of
companies. On February 14, 2011 the new Turkish Commercial Code was published in the
official gazette and came into force on July 1, 2012. In the European Union (EU)
integration process of Turkey, the code mainly aims to harmonize the Turkish Commercial
Code with European legislation system. Provisions set forth in the Turkish Commercial
Code aims to regulate commercial relations in accordance with the recent changes in the
local and global business environment. The Code concerns social responsibility of the
companies and take corporate ethical standards into consideration. The corporate
governance approach of the Code is based on four pillars: transparency, fairness,
accountability and responsibility.
The Code accepts the single shareholder joint stock company and single member partner
limited liability company. The Code allows the board meetings and general assembly
meetings to be held in electronic media. The Board of Directors is responsible for the
preparation of the financial statements in conformity with the Turkish Financial Reporting
Standards which are identical with International Financial Reporting Standards (IFRS).
The audit is required to be performed in accordance with Turkish Auditing Standards
which are identical with International Auditing Standards (ISAs). Furthermore, the Code
allows the application of special audits on the request of any shareholder.
3. RESEARCH METHODOLOGY AND FINDINGS
With the aim of analyzing development in corporate governance practices, corporate
governance rating reports of ISE Corporate Governance Index Companies were examined
for the years between 2007 and 2012. The study covers seven companies for 2007, 12
companies for 2008, 24 companies for 2009, 31 companies for 2010, 38 companies for
2011 and 44 companies for 2012. The list of ISE corporate governance index companies
and their corporate governance ratings for the years between 2007 and 2012 are listed in
Appendix I. In appendix I, ratings for each section of corporate governance principles are
given along with the overall corporate governance grades.
Corporate governance ratings between the years of 2007 and 2012 demonstrate the degree
of compliance with CMB’s Corporate Goverance Principles released in 2003 and revised
in 2005. Rating Institutions has revised their rating methodology for corporate governance
ratings issued on or after December 31,2012. After December 31, 2012 corporate
governance ratings are going to be determined on the basis of both Corporate Governance
Principles and the Communiqué Serial: IV, No: 56. As a result, this study includes
corporate governance ratings merely based on corporate governance principles.
Corporate governance ratings are granted out of 10. Rating scale and the explanation of
each rating are given in Appendix II. Like Corporate Governance Principles, corporate
governance rating reports include 4 main sections namely Shareholders, Public Disclosure
and Transparency, Stakeholders and Board of Directors. In compliance with the CMB’s
directive, rating institutions use weights for each main section to reach an overall
Corporate Governance Rating. The weights are as follows: Shareholders 25%, Disclosure
and Transparency 35%, Stakeholders: 15%, Board of Directors 25%. In the remaining part
of the paper, each section will be analyzed in detail. For each section, initially corporate
governance principles will be summarized, the weaknesses and strengthnesses of
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companies until 2009 will be explained and then the improvements in corporate
governance practices after 2009 will be analyzed.
3.1.Shareholders
The first section of the CMB Corporate Governance Principles concerns the protection of
shareholders’ rights. The Principles list some basic rights of shareholders including;
obtaining accurate information, actively participating in the general shareholders’ meeting,
voting rights, minority and dividend rights, and equal treatment. Under Principles,
“Shareholders Relations Department” should be established to enhance relations between
shareholders and the company. Except trade secrets, all information required to exercise
shareholder’s rights should be available to all shareholders and there should not be any
discrimination among them. Shareholders should have right to request a special auditor to
be appointed. Shareholders section of principles covers the process of preparation for the
general shareholders’ meeting, its conduct and publication of the results. In this context, in
order to assure a high participation, general shareholders’ meeting should be announced at
least three weeks in advance. Invitation should include date, time, location and agenda of
the meeting along with all necessary informative documents. During the meeting,
shareholders should have equal opportunities to declare their opinions especially regarding
remuneration policy for board members and executives. Once one owns a share, the right
to vote is automatically granted. Privileges regarding voting rights should be avoided and a
shareholder may have right to vote by use of a proxy who is a shareholder or not. The
cumulative voting procedure should be adopted with the purpose of protecting minority
rights. Moreover, company’s dividend policy should be defined clearly in the annual report
and it should be announced at the general shareholders’ meeting. Figure 1 shows the ISE
Corporate Governance Index companies’ average ratings for shareholder sections between
2007 and 2012.
Figure 1
Average Ratings for Shareholders Section
Shareholders
10
8
7.9
8.05
8.15
8.22
8.31
8.47
2007
2008
2009
2010
2011
2012
6
4
2
0
3.1.1. Strengthnesses and Weaknesses of Companies Until 2009
After examining shareholders sections of corporate governance rating reports, following
strengtnesses and weaknesses were identified.Even though some of the companies do not
have Corporate Governance Committee, Shareholders Relations Departments have been
established by almost all companies. For the companies which have Corporate Governance
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Committee within the board, the activities of the Shareholders Relations Department are
performed under the supervision of Corporate Governance Committee.
General Shareholders’ Meetings are held in accordance with the articles of associations
and related legislation. With regard to facilitating shareholder rights, all necessary
information and documentation are available for and easily accessible by the shareholders.
In compliance with corporate governance principles, a substantial number of companies do
not have provisions to apply ceiling limit to shareholders’ number of votes. Shareholders
generally have right to exercise proxy voting and proxy forms are duly disclose for those
who are not able to participate in the general shareholders meeting in person. A vast
number of companies have a clearly defined dividend policy which is announced to the
shareholders at the general shareholders meeting and also included in the company’s
annual report. As a result of rating institutions’ review of the articles of associations of the
companies, the minutes of the general shareholders meetings, and the interview with
company officials, institutions have observed that equal treatment of shareholders are
prominently pervasive among Turkish companies.
However, there are some prominent areas that need further improvements to protect the
rights of minority shareholders. Almost all companies do not have provision that allows
shareholders the right to request from the general shareholder meeting the appointment of a
special auditor for the examination and clarification of a specific material situation.
Likewise, almost all companies do not have cumulative voting procedure. Additionally,
some companies have voting privileges for preferred stocks. The strengthnesses and
weaknesses of companies regarding shareholder section are summarized below:
Table 2
Shareholders
Successful Implementation
Shareholders relations department
General shareholders meeting
No ceiling limits applied on the number of votes
Shareholders generally have right to exercise proxy voting
No provisions to impede the transfer of shares
Dividend policies are established and publicly disclosed
Equal treatment of shareholders
The Issues Should Be Improved
Corporate governance committee within the board
Voting privileges
Deficiencies
Right to request appointment of special auditors from the general shareholders meeting
Lack of cumulative voting procedures
3.1.2. Improvements and Ongoing Weaknesses after 2009
The most prominent development after 2009 is related to establishment of committees. It is
observed that almost all companies has established a corporate governance committee
within the board. It is also observed that almost all company’s corporate governance
committee chair is an independent member. Voting privilege is still exist for some
companies. For example, a company has voting privileges for the nomination of candidates
for board membership in the articles of association and another company has some
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
privilages for preferred stocks. In conclusion, it is observed that voting privilage is one of
the areas that still needs improvements.
Even years have passed after the issuance of corporate governance principles, there is no
improvement regarding right to request appointment of special auditors and cumulative
voting procedures. A vast number of companies do not have provision in the articles of
association which allow shareholders to have the right to request appointment of special
auditors from the general shareholder meeting. Additionally, it is examined that almost
none of the companies apply cumulative voting procedure.
3.2.Public Disclosure and Transparency
The principle of public disclosure and transparency is aimed at presentation of timely,
accurate, comprehensible, analyzable, highly accessible and available information to
shareholders and stakeholders. Under this section, companies should establish information
policy and disclose it to the public. Two executives should be assigned to sign official
documents related to public disclosures. All information related to company should be
disclosed accurate, complete, comprehensible and easily accessible. According to
principles, key areas that should be disclosed to public are: any developments that may
affect the value of the company’s capital market instruments, the dividend policy of
companies, ethical rules of companies, and projected financial statements. Additionally, a
company which is listed on foreign securities exchange should simultaneously disclose the
information in Turkey that is disclosed abroad. Whenever shareholding or voting right
percentage of an individual or group reaches, exceeds or fall below the thresholds of 5%,
10%, 25%, 33%, 50%, and 66,67% of total share capital or voting rights, a company
should disclose such information. Moreover, the company’s ultimate controlling individual
shareholder or shareholders should be disclosed to the public, as identified after being
released from indirect or cross ownership relations between co-owners. The company’s
capital structure should be presented in a table format that would include the names of the
ultimate controlling individual shareholders’ amount and proportion of their shares. Board
members, executives and shareholders who directly or indirectly own 5% of the company’s
capital should disclose all transactions performed on the company’s capital market
instruments and all information about the purchase and sales of capital market instruments
of other group companies or any other company with whom the company maintains a
material commercial relationship. Furthermore, commercial and non-commercial
transactions between the company and companies, where board members, executives and
shareholders, who either directly or indirectly own at least 5% of the company’s capital,
possess at least 5% and more of shareholding are disclosed to public. Annual reports
should cover all kinds of information regarding company’s activities. Periodical financial
statements and footnotes, all forms of incentives that is designed to grant shares to
employees, information about the sector in which company operates, board of directors’
and audit firm’s opinion about the internal control system should be disclosed to public in
an annual report. Board of directors can appoint an audit firm for a maximum period of 5
years. Only after two accounting periods following the audit firm rotation, the company
can appoint the same audit firm. Audit firms and auditors are prohibited to provide
consultancy services to the companies to which they provide external audit services within
the same period. A consultancy firm, which has a parent audit firm, cannot provide
consultancy services to the company that the parent audit firms provides external audit
services to within the same period. Lastly, list of names that may possess price sensitive
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information should be disclosed to public. Public Disclosure and Transparency Sections’
average ratings are shown in Figure 2.
Figure 2
Average Ratings for Public Disclosure and Transparency Section
Public Disclosure and Transparency
10
8.44
8.60
8.79
9.01
9.08
9.16
2007
2008
2009
2010
2011
2012
8
6
4
2
0
3.2.1. Strengthnesses and Weaknesses of Companies until 2009
As a result of examining Public Disclosure and Transparency sections of rating reports,
following comments concluded for ISE Corporate Governance Index companies.
Companies utilize a website as an effective tool in public disclosure. All companies listed
on Corporate Governance Index have an easily accessible websites and it is observed that
increasing number of companies is in effort to improve the content of their websites. While
Turkish versions of websites are comprehensive enough, English versions are generally in
improvement progress in terms of content and disclosure for foreign investors. Another
developing area is information policy. It is observed that before 2009, many companies did
not have any written information policy, on the other hand according to 2009 rating
reports; almost all companies have established a collective set of written principles and an
information policy to be used in public disclosure. The information or disclosure policy
aim at providing shareholders, stakeholders and the public timely, complete and accurate
information in line with the CMB corporate governance principles. The disclosure policy
covers scope, forms, frequency and methods of disclosure, informs about the company’s
authorized persons regarding public disclosure, and outlines how the company deals with
investors. English and Turkish version of comprehensive annual reports are disclosed on
website of companies. Periodical financial statements and annual reports are signed by the
responsible board members and executives indicating that the current periodical financial
statements completely reflect the true financial status of the company. Periodical financial
statements and footnotes are prepared in line with CMB legislation and international
accounting standards and applied accounting policies are included in the footnotes of the
financial statements. On the other hand, forward looking information such as projected
financial statements is very rare in annual reports. Overall, annual reports are
comprehensive in terms of content and information relevant to investors. Nevertheless,
there are still some areas that need further improvement. The Corporate Governance
Compliance Reports regarding the implementation of the principles are included in the
annual reports. However, most of the companies don’t explain the reasons of lacking
implementation in their Corporate Governance Compliance Reports. Most of the
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companies have established ethical rules and they are disclosed in the form of a Code of
Ethics.
A list of the names of insiders is disclosed in annual reports. However, in order to prevent
insider trading, companies should try to enforce necessary measures and establish policy
for insider trading that provides some information on the matter like definitions,
implementation, responsibilities and penalties for violators.
All of the companies that are examined in this study are publicly held companies. By CMB
legislation, companies have to notify ISE about every kind of developments which will
considerably influence the company. All of the companies comply with CMB and ISE
legislations in disclosure process regarding important events and developments. All
companies duly disclose any significant changes in the management and capital structure
of the company, change in core operations of the company, and any kind of information
that would affect the profitability of company in the “disclosure of special events”
published by the Istanbul Stock Exchange (ISE).
Major deficiencies regarding this section are the facts that; most of the companies’ ultimate
controlling individual shareholders are not disclosed to public and remuneration of
executives generally do not exist in annual reports. Moreover, most of the companies’
capital structure is not presented in a table format that would include the names of the
ultimate controlling individual shareholders names, amount and proportion of their share.
Under principles, in case shareholding or voting right percentage of an individual reaches,
exceeds or falls below the thresholds of total share capital or voting rights, companies
should disclose information to public. However, according to investigation of rating
institutions, almost all companies’ officials have declared that there is no transaction in this
respect.
As a result of rating institutions’ examining the auditor contract and having interview with
corporate officials and responsible independent auditor, they have reached a conclusion on
auditors’ independence. The independent auditors’ reports confirm that the financial
statements present fairly the financial position and annual performance of the company in
accordance with the financial reporting standards issued by the CMB.
Table 3
Public Disclosure and Transparency
Successful Implementation
Comprehensive and easily accessible websites
Written information policy
Comprehensive annual reports
Periodical financial statements comply with rules and regulations
Insider lists are published
Disclosure about developments that may affect the value of the company
Code of ethics
The Issues Should Be Improved
English version of websites
Deficiencies
Corporate Governance Compliance Report does not include reasons of lacking
implementation
Forward looking information in annual reports
Remuneration of executives are not disclosed to public
List of ultimate controlling individual shareholders
Measures and precautions to prevent insider trading.
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3.2.2. Improvements and Ongoing Weaknesses after 2009
There is a considerable improvement in establishing an English version of web sites.
Almost all companies has established an English version of websites that contain all
relevant information in English. Moreover, some companies have restructured corporate
web site to provide richer content for investors.
Whereas there is an improvement in respect to declaration of reasons for non application of
some of the Corporate Governance Principles, there are still some companies that insist on
not to disclose the reasons of noncompliance.
A visible improvement can be observed in presentation of ultimate controlling individuals.
Majority of the companies has begun to disclose ultimate controlling individual
shareholders. However such area still needs improvement because the list of ultimate
controlling individual shareholders are still not included in some companies’ annual
reports. Similarly, in comparison to 2009 there is an improvement in disclosing
remuneration of executives, however this is another area that needs more improvement.
Some companies’ annual reports involve the management’s evaluation of forward looking
information that includes estimates, expectations and strategic priorities of the company.
Nonetheless, most of the companies still do not disclose future forecasts of financial
information. All of the companies disclose the list of insider traders however by 2012 very
few of them has taken measures to prevent insiders.
3.3.Stakeholders
This section of CMB Corporate Governance Principles covers the company’s basic
policies towards stakeholders. Under this section, the corporate governance framework of
the company should recognize the rights of stakeholders established by laws or through
any other mutual agreement. In case of the rights of the stakeholders are not regulated by a
legislation, the company should preserve the interest of stakeholders. Stakeholders should
be informed about company’s policies and procedures, which aim to protect stakeholders’
rights. Company should overcome any conflicts between the company and its stakeholders.
Stakeholders should be able to freely communicate their concerns about any illegal or
unethical practices to the board. The company should establish mechanisms to encourage
participation of the stakeholders in the management of the company. Board of directors
and executives should not take actions that would cause the company assets lose value.
The company should adopt written employment policies that would provide equal
opportunities to individuals who have similar specifications. The company should conduct
regular informative meetings with employees and employees should be informed any
significant development or decision taken by the company that clearly affects them. The
opinions of the trade union regarding the rights of the employees should be taken into
account. The company should adhere to quality standards in production. Ethical rules
should be established, submitted to the general shareholders’ meeting and disclosed to the
public. The company should encourage social responsibility projects that cover subjects
such as education, health and environment. Average ratings for stakeholders section for the
years 2007, 2008 and 2009 are shown in Figure 4.
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Figure 3
Average Ratings for Stakeholders Section
Stakeholders
10
8.04
8.64
8.88
8.85
9.01
9.06
2008
2009
2010
2011
2012
8
6
4
2
0
2007
3.3.1. Strengthnesses and Weaknesses of Companies until 2009
As a result of overviewing Stakeholders sections of rating reports, comments are
summarized as follows. With regard to relations between companies and stakeholders,
none of the companies have experienced infringements regarding the stakeholders’ rights
that are protected by legislation and contracts. Protection of stakeholders’ rights is
facilitated by all companies. However, majority of the companies do not have any
provisions in the articles of associations for the company promoting the participation of
stakeholders in the management of the company. Thus, stakeholders do not take part in
management. Stakeholders are informed of the company policies and procedures most
commonly via web sites. For many companies, the communication between the company
and the suppliers is kept through annual communication meetings. Companies also take
into consideration customer satisfaction and Customer Communications Centers are
responsible for dealing with customers’ problems. Most of the companies have strict
quality standards for production systems. TS_EN ISO 9001 certificates prove that quality
management systems have been implementing within companies. In production processes,
companies are sensitive to use less polluting materials, reduce waste and recycle. They also
generally make considerable contribution to the other areas of social responsibility such as
education and social health. Companies provide information on their social responsibility
activities within their annual reports as well as on their web sites.
While almost all companies have written code of ethics that was approved by board, some
of them still have not submitted to general shareholders’ meeting. Companies have written
Human Resources’ Policy which regulates staff training, performance evaluation and other
relevant subjects. Companies provide equal opportunities and treatment to individuals who
have similar specifications. On the other side, employees’ participation to management is
an area that should be improved for many companies. Trade unions take active part in
many companies.
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Table 4
Stakeholders
Successful Implementation
No infringements regarding the stakeholders’ rights
Effective human resources policy
Wide range of social responsibility projects
Comprehensive codes of ethics
Quality standards in company products and services
Relations with customers and suppliers
The Issues Should Be Improved
Employees participation to management
Deficiencies
No provision in the articles of associations regarding the participation of stakeholders in the
management
3.3.2. Improvements and Ongoing Weaknesses after 2009
During the examination of stakeholders sections of corporate governance reports, it is
observed that employees and stakeholders participation to management still needs a
significant improvement. Most of the companies do not have provision in the articles of
association regarding the participation of stakeholders in the management of the company.
However some of the companies declared that there are certain implementations or some
actions in place.
The reason of the increase in the average rating of stakeholders section is mainly because
of the improvements in other areas such as social responsibility projects, codes of ethics or
relations with customers and suppliers.
3.4.Board of Directors
Under the fourth section of CMB Principles, the mission and vision of the company should
be established and disclosed to public. With respect to the company’s mission and vision,
the board of the directors acts as the main responsible body for the company’s goals. The
board of the directors’ responsibilities and duties should be defined in the articles of
association and annual reports of the companies. Board members should be qualified and
proficient about the management of the company. They should be eligible in terms of
background and work history.
Board of the directors comprises of both executive and non-executive members. Board
chairman and chief executive officer should not be the same person and majority of the
board of directors should consist of non-executive members. The board also should
comprise independent members. At least one third of the board of directors and in any case
two members of the board should be independent. A person who has been a member of the
company’s board of directors for seven years cannot be appointed as an independent
member to the board of directors. With respect to election of the board of directors,
cumulative voting procedure should be adopted. Compensation of board members should
be determined at general shareholders’ meeting. Incentive remunerations of board of
directors should be based on performance of both board members and company. Audit
committee and corporate governance committee along with other necessary committees
should be formed. Chairman for each committee should be elected among independent
members of board. Each committee should comprise of at least two members and if there
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
are two members, both of them should be non-executive members. If there are more than
two members, the majority of committee members should be non-executive members.
Additionally, board members cannot be assigned to more than two committees. An audit
committee oversees the financial and operational activities of the company and should
convene at least once in three months. Corporate governance committee should be in
charge of monitoring corporate governance practices compliance with Principles. The
majority of the corporate governance committee should comprise of independent members
and the chief executive officer/general director should not be a member of this committee.
Board members should devote sufficient time for company’s business and they should be
jointly liable for the damage caused by their insufficient performance on their duties
assigned to them by legislation, the articles of association and the general shareholders’
meeting. Board members are responsible for preparing financial statements and
establishing internal control and risk management mechanisms within the company. The
chief executive officer/general manager, the managing director or the head of the relevant
department responsible for the preparation of financial statements should sign a written
official declaration that covers items such as; carefully examination of financial statements
and annual reports, no misleading statements or lack of information in financial statements
and reflecting the truth about the company’s financial situation and operations in financial
statements. Some of the other duties of board of directors are; approving annual budgets,
business plans of company and remuneration of executives, determining ethical rules,
information policies, policies of shareholders and stakeholders and controlling the
company’s expenditures that exceed 10% of total assets. In case of opposition of an
independent board member in a particular issue at the board meeting, dissenting vote
should be disclosed to public. Board of director section’s average ratings for Corporate
Governance Index Companies is graphed below.
Figure 4
Average Ratings for Board of Director Section
Board of Director
10.00
8.00
7.00
7.07
6.92
7.13
7.27
2007
2008
2009
2010
2011
8.15
6.00
4.00
2.00
0.00
2012
3.4.1. Strengthnesses and Weaknesses of Companies until 2009
Boards of directors have the highest level power to take decisions, to designate strategies
and to represent the company. Within this framework, the mission, vision and strategic
targets of ISE Corporate Governance Index companies have been established by boards of
directors and are disclosed to public. Overall, the boards of directors fulfill their duties
with due diligence and meets their responsibilities. Board meetings are conducted in an
efficient and sound manner. In case of dissenting votes the dissenting board members are
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urged to indicate the reasons in the minutes. Executives are to attend meetings whenever
necessary and requested. However, some companies’ board of the directors still does not
have sufficient independent members. Nonetheless, companies that have independent
member in board generally do not comply with the one-third proportion of independent
directors recommended by the CMB principles. Duties of board members are clearly
described in articles of association and annual reports. Boards are staffed by highly
qualified and managerially skillful members. However, before commencing work, board
members’ written declarations that they will comply with the legislation, articles of
associations and in house regulations are not practicing in companies. Furthermore, there is
also no declaration regarding the fact that in case of incompliance members of board would
be jointly liable to compensate the losses.
Within Corporate Governance Index companies generally two committees have been set
up to support the work of the board; Audit Committee and Corporate Governance
Committee. Almost all companies have audit committee that oversees all internal and
external audit activities. However, there is still considerable number of companies need to
form Corporate Governance Committee. Additionally, since independent member of board
is a prominent deficiency of companies, chairmen of committees are another subject that
needs to be improved. The work of existing committees is closely related to the board.
Committee meeting minutes and special reports are reported to the boards.
The remuneration policy could be further improved in order to comply with the CMB
principles. Compensation is determined by general shareholders meeting and it is solely
composed of a fixed salary. Generally, there are no additional attendance or committee
membership fees.
Table 5
Board of Directors
Successful Implementation
Vision, mission and strategic goals are clearly defined
The board is staffed with effective and highly qualified members
Executives are qualified and experienced
The Issues Should Be Improved
Separate the Board Chairman and the General Manager/CEO positions
Corporate Governance Committee
Independent member in the Board of Directors
Deficiencies
The cumulative voting system is not applied
No written declaration regarding executives’ joint liability for company’s losses caused by a
violation of their duties
The stakeholders do not have the right to call for a meeting of Board of Directors
No performance based incentive remunerations
3.4.2. Improvements and Ongoing Weaknesses after 2009
After 2009 tremendous improvement was observed regarding increasing number of
independent board members and establishment of new committees. During the
examination of corporate governance rating reports it is observed that almost all companies
have established corporate governance committees. Further, almost all corporate
governance committees has chaired by independent members. Almost all companies has an
audit committee that is formed entirely by indepent board members. Generally, all
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members of the audit committee and the majority of the members of the corporate
governance committee are non-executive board members. Along with corporate
governance and audit committee majority of companies have established risk management
committee.
While there is a considerable increase in the compliance degree of committee and
independent member requirements, there is slight improvement concerning other
weaknesses. It is generally observed that cumulative voting system still is not being
applied by companies. Moreover, generally companies do not have written declaration
regarding executives’ joint liability for company’s losses caused by a violation of their
duties. Additionally, for majority of companies stakeholders do not have right to call for a
meeting of Board of Directors. Also, it is observed that only some of the companies utilize
performance based incentive remunerations. To sum up, such areas still need
improvements for the companies listed in ISE Corporate Governance Index.
CONCLUDING REMARKS
Istanbul Stock Exchange (ISE) Corporate Governance Index has been active since August
31, 2007. Year by year, number of companies in this index has been increasing drastically.
A review of corporate governance rating reports demonstrates that the average of overall
corporate governance ratings is well above 7 which is the threshold for ISE Corporate
Governance Index. It is observed that overall corporate governance ratings have been
gradually increasing year by year. In order to summarize the improvement of corporate
governance practices in Turkey, average overall grades for the years between 2007 and
2012 are shown in Figure 5.
ISE Corporate Governance Index Companies’ Average Overall Ratings
Figure 5
Overall Ratings
10
8
7.89
8.11
8.18
8.32
8.44
8.73
2007
2008
2009
2010
2011
2012
6
4
2
0
Further examination of each section reveals the weaknesses and strengthnesses of
companies. According to this examination it is observed that while shareholders, public
disclosure and transparency and stakeholders sections’ grades have increased gradually,
there were slight improvement in board of directors’ section until 2011. The sharp increase
in the average ratings of board of directors section might be due to the enforcement of
Communiqué Serial : IV, No:56. Because, under this Communiqué all members of audit
committee and the chairmen of other committee’s must be selected from independent
board members.
Figure 6
Ratings for the Years Between 2007 and 2012
220
�8.47
9.16
9.06
8.15
8.31
9.08
9.01
7.27
8.22
9.01
8.85
7.13
8.15
8.79
8.88
6.92
8.05
8.60
8.64
7.07
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
7.90
8.44
8.04
7.00
International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Shareholders
Public Disclosure and
Transperancy
Stakeholders
Board of Directors
2007
2008
2009
2010
2011
2012
Figure 6 depicts the developments in each section from 2007 to 2012. In summary, board
of directors is the weakest part with the average 7,00, 7.07, 6.92, 7.13, 7.27, and 8,15 in
years 2007, 2008, 2009,2010, 2011, and 2012 respectively.
This study includes the analysis of corporate governance practices of Istanbul Stock
Exchange Corporate Governance Index Companies. In the future, this study can be
expanded by analyzing Istanbul Stock Exchange National 100 Index Companies. Since
most of the ISE National 100 Index Companies do not publish corporate governance rating
reports, or authors may conduct analysis through developing a corporate governance
scorecard.
APPENDIX I: Corporate Governance Ratings
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7
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9
10
11
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13
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20
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29
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41
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Company
DOGAN YAYIN HOLDING A.S.
HURRIYET GAZETECILIK VE MATBAACILIK A.S.
TOFAS TURK OTOMOBIL FABRIKASI A.S.
TURK TRAKTOR VE ZIRAAT MAKINELERI A.S.
TURKIYE PETROL RAFINERILERI A.S.
VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
Y VE Y GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
ANADOLU EFES BIRACILIK VE MALT SANAYII A.S.
ASYA KATILIM BANKASI A.S.
DENTAS AMBALAJ VE KAGIT SANAYI A.S.
OTOKAR OTOMOTIV VE SAVUNMA SANAYI A.S.
YAPI VE KREDI BANKASI A.S.
ARCELIK ANONIM SIRKETI
COCA-COLA ICECEK A.S.
DOGAN SIRKETLER GRUBU HOLDING A.S.
IS FINANSAL KIRALAMA A.S.
LOGO YAZILIM SANAYI VE TICARET A.S..
PETKIM PETROKIMYA HOLDING. A.S.
TURK PRYSMIAN KABLO VE SISTEMLERI A.S.
SEKERBANK TURK ANONIM SIRKETI
TAV HAVALIMANLARI HOLDING A.S.
TURKIYE SINAI KALKINMA BANKASI A.S.
TURK TELEKOMUNIKASYON A.S.
VAKIF MENKUL KIYMETLER YATIRIM ORT. A.S.
TURCAS PETROL A.S.
PARK ELEKTRIK URETIM MAD. SAN. VE TIC. A.S.
AYGAZ A.S.
ALBARAKA TURK KATILIM BANKASI A.S.
YAZICILAR HOLDING A.S.
IHLAS HOLDING A.S.
IHLAS EV ALETLERI IMALAT SAN. VE TIC. A.S.
DOGUS OTOMOTIV SERVIS VE TIC. A.S.
MENSA SINAI TICARI VE MALI YATIRIMLAR A.S.
PINAR SUT MAMULLERI SAN. A.Ş.
EGELI & CO YATIRIM HOLDING A.S.
TURKIYE HALK BANKASI A.S.
IS YATIRIM MENKUL DEGERLER A.S.
GLOBAL YATIRIM HOLDING A.S.
GARANTI FACTORING HIZMETLERI A.S.
ENKA INSAAT VE SAN. A.S.
PINAR ENTEGRE ET VE UN SANAYII A.S.
BOYNER BUYUK MAGAZACILIK A.S.
ASELSAN ELEKTRONIK SANAYI VE TIC. A.S.
IS GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
AVERAGE
222
Overall Corporate Governance Ratings
2007 2008 2009 2010 2011 2012
8,59
8,76
8,76
8,78
8,88
9,01
7,97
8,32
8,43
8,47
8,55
9,01
7,74
8,16
8,24
8,42
8,58
9,03
7,52
7,83
8,12
8,30
8,50
8,90
7,91
8,34
8,34
8,56
8,62
9,10
7,59
8,26
8,34
8,40
8,59
8,83
7,88
8,16
8,16
8,27
8,56
8,66
8,10
8,27
8,40
8,55
8,94
7,56
7,82
8,17
8,26
8,61
7,82
7,82
8,03
8,06
8,69
7,94
8,12
8,32
8,47
8,68
8,02
8,44
8,79
8,80
8,81
8,21
8,55
8,59
9,11
8,30
8,43
8,50
8,88
8,26
8,42
8,59
9,03
8,02
8,38
8,58
9,03
8,05
8,17
8,26
8,60
7,71
8,19
8,52
8,72
7,76
8,08
8,15
8,44
8,14
8,66
8,76
8,82
8,33
9,04
9,10
9,20
8,77
8,92
9,10
9,11
8,01
8,27
8,87
8,80
7,81
8,23
8,41
8,73
7,52
8,12
8,40
8,65
8,67
8,82
8,46
8,50
8,96
8,14
8,28
8,22
8,04
8,30
8,78
7,71
7,91
8,09
7,12
7,39
7,68
7,71
8,63
7,59
7,75
8,34
8,87
8,20
8,60
8,74
8,77
8,63
8,87
8,36
8,80
8,36
9,16
8,77
8,64
8,77
8,53
7,89
8,11
8,18
8,32
8,44
8,73
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Company
DOGAN YAYIN HOLDING A.S.
HURRIYET GAZETECILIK VE MATBAACILIK A.S.
TOFAS TURK OTOMOBIL FABRIKASI A.S.
TURK TRAKTOR VE ZIRAAT MAKINELERI A.S.
TURKIYE PETROL RAFINERILERI A.S.
VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
Y VE Y GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
ANADOLU EFES BIRACILIK VE MALT SANAYII A.S.
ASYA KATILIM BANKASI A.S.
DENTAS AMBALAJ VE KAGIT SANAYI A.S.
OTOKAR OTOMOTIV VE SAVUNMA SANAYI A.S.
YAPI VE KREDI BANKASI A.S.
ARCELIK ANONIM SIRKETI
COCA-COLA ICECEK A.S.
DOGAN SIRKETLER GRUBU HOLDING A.S.
IS FINANSAL KIRALAMA A.S.
LOGO YAZILIM SANAYI VE TICARET A.S..
PETKIM PETROKIMYA HOLDING. A.S.
TURK PRYSMIAN KABLO VE SISTEMLERI A.S.
SEKERBANK TURK ANONIM SIRKETI
TAV HAVALIMANLARI HOLDING A.S.
TURKIYE SINAI KALKINMA BANKASI A.S.
TURK TELEKOMUNIKASYON A.S.
VAKIF MENKUL KIYMETLER YATIRIM ORT. A.S.
TURCAS PETROL A.S.
PARK ELEKTRIK URETIM MAD. SAN. VE TIC. A.S.
AYGAZ A.S.
ALBARAKA TURK KATILIM BANKASI A.S.
YAZICILAR HOLDING A.S.
IHLAS HOLDING A.S.
IHLAS EV ALETLERI IMALAT SAN. VE TIC. A.S.
DOGUS OTOMOTIV SERVIS VE TIC. A.S.
MENSA SINAI TICARI VE MALI YATIRIMLAR A.S.
PINAR SUT MAMULLERI SAN. A.Ş.
EGELI & CO YATIRIM HOLDING A.S.
TURKIYE HALK BANKASI A.S.
IS YATIRIM MENKUL DEGERLER A.S.
GLOBAL YATIRIM HOLDING A.S.
GARANTI FACTORING HIZMETLERI A.S.
ENKA INSAAT VE SAN. A.S.
PINAR ENTEGRE ET VE UN SANAYII A.S.
BOYNER BUYUK MAGAZACILIK A.S.
ASELSAN ELEKTRONIK SANAYI VE TIC. A.S.
IS GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
AVERAGE
223
2007
8,53
7,89
7,52
7,57
7,73
8,01
8,03
2008
8,88
8,32
7,76
7,76
8,31
8,43
8,27
8,61
7,02
6,16
8,74
8,29
7,90
8,05
Shareholders
2009 2010
8,88
8,88
8,32
8,51
7,73
8,00
7,98
8,00
8,30
8,48
8,47
8,51
8,53
8,67
8,70
8,80
7,24
7,29
8,16
8,40
8,81
8,77
8,56
8,72
8,55
8,87
7,95
8,00
8,55
8,55
8,20
8,22
7,99
8,16
7,21
8,00
8,67
8,88
7,40
8,51
8,10
9,05
8,55
8,77
7,69
7,94
7,03
7,86
7,29
8,68
8,81
7,46
7,98
7,11
5,77
8,15
8,22
2011
9,04
8,69
8,05
8,05
8,50
8,51
8,75
8,82
7,35
8,40
8,91
8,71
8,87
8,03
8,71
8,15
8,21
8,40
8,71
8,54
9,06
8,78
8,07
8,20
8,30
8,68
8,91
7,71
7,99
7,89
6,81
6,86
7,87
8,33
7,94
8,62
8,13
8,23
8,31
2012
8,92
9,16
8,11
8,09
8,77
8,84
8,75
8,85
7,36
8,65
8,95
8,72
8,95
8,11
8,71
8,30
8,49
8,61
8,85
8,63
9,10
8,79
8,07
8,40
8,40
8,76
8,96
7,73
8,02
8,01
7,27
8,33
7,97
8,45
8,09
8,75
8,61
8,35
8,19
8,91
8,14
8,77
8,00
8,66
8,47
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DOGAN YAYIN HOLDING A.S.
HURRIYET GAZETECILIK VE MATBAACILIK A.S.
TOFAS TURK OTOMOBIL FABRIKASI A.S.
TURK TRAKTOR VE ZIRAAT MAKINELERI A.S.
TURKIYE PETROL RAFINERILERI A.S.
VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
Y VE Y GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
ANADOLU EFES BIRACILIK VE MALT SANAYII A.S.
ASYA KATILIM BANKASI A.S.
DENTAS AMBALAJ VE KAGIT SANAYI A.S.
OTOKAR OTOMOTIV VE SAVUNMA SANAYI A.S.
YAPI VE KREDI BANKASI A.S.
ARCELIK ANONIM SIRKETI
COCA-COLA ICECEK A.S.
DOGAN SIRKETLER GRUBU HOLDING A.S.
IS FINANSAL KIRALAMA A.S.
LOGO YAZILIM SANAYI VE TICARET A.S..
PETKIM PETROKIMYA HOLDING. A.S.
TURK PRYSMIAN KABLO VE SISTEMLERI A.S.
SEKERBANK TURK ANONIM SIRKETI
TAV HAVALIMANLARI HOLDING A.S.
TURKIYE SINAI KALKINMA BANKASI A.S.
TURK TELEKOMUNIKASYON A.S.
VAKIF MENKUL KIYMETLER YATIRIM ORT. A.S.
TURCAS PETROL A.S.
PARK ELEKTRIK URETIM MAD. SAN. VE TIC. A.S.
AYGAZ A.S.
ALBARAKA TURK KATILIM BANKASI A.S.
YAZICILAR HOLDING A.S.
IHLAS HOLDING A.S.
IHLAS EV ALETLERI IMALAT SAN. VE TIC. A.S.
DOGUS OTOMOTIV SERVIS VE TIC. A.S.
MENSA SINAI TICARI VE MALI YATIRIMLAR A.S.
PINAR SUT MAMULLERI SAN. A.Ş.
EGELI & CO YATIRIM HOLDING A.S.
TURKIYE HALK BANKASI A.S.
IS YATIRIM MENKUL DEGERLER A.S.
GLOBAL YATIRIM HOLDING A.S.
GARANTI FACTORING HIZMETLERI A.S.
ENKA INSAAT VE SAN. A.S.
PINAR ENTEGRE ET VE UN SANAYII A.S.
BOYNER BUYUK MAGAZACILIK A.S.
ASELSAN ELEKTRONIK SANAYI VE TIC. A.S.
IS GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
AVERAGE
224
Public Disclosure and Transparency
2007 2008 2009 2010 2011 2012
9,60
9,68
9,68
9,73
9,82
9,82
8,71
9,11
9,13
9,16
9,19
9,39
8,27
9,05
9,26
9,21
9,22
9,15
7,91
8,56
8,84
9,02
9,09
9,08
8,83
8,98
8,98
9,12
9,22
9,22
7,56
8,16
8,33
8,37
8,53
8,80
8,18
8,74
8,76
8,98
9,48
9,40
8,47
8,70
8,96
9,27
9,36
7,33
7,94
8,72
8,91
9,61
8,72
8,71
8,93
8,94
9,04
8,27
8,48
8,95
8,95
8,95
8,11
8,83
9,17
9,25
9,26
8,71
9,22
9,30
9,34
9,21
9,35
9,53
9,54
9,21
9,47
9,41
9,41
8,51
9,23
9,50
9,54
8,54
8,62
8,70
8,81
8,81
9,04
9,36
9,33
7,87
8,61
8,73
8,59
8,70
8,90
8,94
8,95
8,69
9,26
9,34
9,63
9,31
9,36
9,79
9,79
8,98
9,22
9,31
9,33
8,86
8,78
8,83
9,04
8,78
8,83
9,04
9,44
9,47
9,48
9,05
9,07
9,13
9,04
9,04
9,01
8,79
9,30
9,31
8,59
8,75
8,80
8,11
8,04
8,05
8,82
8,83
8,28
8,51
9,06
9,05
8,31
8,85
9,54
9,53
9,12
9,28
8,81
9,31
8,67
9,60
9,00
9,19
9,35
8,89
8,44
8,60 8,79
9,01 9,08
9,16
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
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DOGAN YAYIN HOLDING A.S.
HURRIYET GAZETECILIK VE MATBAACILIK A.S.
TOFAS TURK OTOMOBIL FABRIKASI A.S.
TURK TRAKTOR VE ZIRAAT MAKINELERI A.S.
TURKIYE PETROL RAFINERILERI A.S.
VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
Y VE Y GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
ANADOLU EFES BIRACILIK VE MALT SANAYII A.S.
ASYA KATILIM BANKASI A.S.
DENTAS AMBALAJ VE KAGIT SANAYI A.S.
OTOKAR OTOMOTIV VE SAVUNMA SANAYI A.S.
YAPI VE KREDI BANKASI A.S.
ARCELIK ANONIM SIRKETI
COCA-COLA ICECEK A.S.
DOGAN SIRKETLER GRUBU HOLDING A.S.
IS FINANSAL KIRALAMA A.S.
LOGO YAZILIM SANAYI VE TICARET A.S..
PETKIM PETROKIMYA HOLDING. A.S.
TURK PRYSMIAN KABLO VE SISTEMLERI A.S.
SEKERBANK TURK ANONIM SIRKETI
TAV HAVALIMANLARI HOLDING A.S.
TURKIYE SINAI KALKINMA BANKASI A.S.
TURK TELEKOMUNIKASYON A.S.
VAKIF MENKUL KIYMETLER YATIRIM ORT. A.S.
TURCAS PETROL A.S.
PARK ELEKTRIK URETIM MAD. SAN. VE TIC. A.S.
AYGAZ A.S.
ALBARAKA TURK KATILIM BANKASI A.S.
YAZICILAR HOLDING A.S.
IHLAS HOLDING A.S.
IHLAS EV ALETLERI IMALAT SAN. VE TIC. A.S.
DOGUS OTOMOTIV SERVIS VE TIC. A.S.
MENSA SINAI TICARI VE MALI YATIRIMLAR A.S.
PINAR SUT MAMULLERI SAN. A.Ş.
EGELI & CO YATIRIM HOLDING A.S.
TURKIYE HALK BANKASI A.S.
IS YATIRIM MENKUL DEGERLER A.S.
GLOBAL YATIRIM HOLDING A.S.
GARANTI FACTORING HIZMETLERI A.S.
ENKA INSAAT VE SAN. A.S.
PINAR ENTEGRE ET VE UN SANAYII A.S.
BOYNER BUYUK MAGAZACILIK A.S.
ASELSAN ELEKTRONIK SANAYI VE TIC. A.S.
IS GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
AVERAGE
225
Stakeholders
2007 2008 2009 2010
7,63 7,82 7,82 7,82
7,40 7,63 8,32 8,32
9,24 9,40 9,40 9,52
8,87 9,15 9,40 9,52
8,81 9,60 9,60 9,82
7,49 9,13 9,13 9,40
6,86 7,18 7,18 7,18
8,80 9,13 9,21
9,15 9,15 9,51
7,70 7,69 7,99
8,63 9,17 9,24
9,50 9,50 9,67
9,52 9,52
9,21 9,64
8,90 8,90
8,87 8,87
8,51 8,92
8,83 9,27
8,71 8,81
9,23 9,79
8,88 9,54
9,57 9,57
8,72 9,15
8,74 8,33
7,33
8,99
9,05
8,04
9,17
7,54
6,63
8,04
8,64
8,88
8,85
2011 2012
7,92 7,95
8,32 9,11
9,52 9,68
9,76 9,76
9,72 9,72
9,40 9,04
7,91 8,52
9,39 9,39
9,56 9,73
8,17 8,55
9,76 9,76
9,54 9,54
9,52 9,52
9,64 9,64
8,90 8,90
9,30 9,53
9,21 9,31
9,51 9,23
9,29 9,29
9,79 9,91
9,68 9,45
9,73 9,73
9,33 9,33
8,54 9,02
8,78 9,27
8,99 8,99
9,05 9,05
8,10 8,21
9,64 9,64
6,82 6,90
6,83 7,07
8,67 8,97
8,68 8,68
9,17 9,31
9,05 9,05
9,66 9,66
8,24 8,43
9,16 9,29
8,46
8,94
9,23
8,86
8,94
7,91
9,01 9,06
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
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Company
DOGAN YAYIN HOLDING A.S.
HURRIYET GAZETECILIK VE MATBAACILIK A.S.
TOFAS TURK OTOMOBIL FABRIKASI A.S.
TURK TRAKTOR VE ZIRAAT MAKINELERI A.S.
TURKIYE PETROL RAFINERILERI A.S.
VESTEL ELEKTRONIK SANAYI VE TICARET A.S.
Y VE Y GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
ANADOLU EFES BIRACILIK VE MALT SANAYII A.S.
ASYA KATILIM BANKASI A.S.
DENTAS AMBALAJ VE KAGIT SANAYI A.S.
OTOKAR OTOMOTIV VE SAVUNMA SANAYI A.S.
YAPI VE KREDI BANKASI A.S.
ARCELIK ANONIM SIRKETI
COCA-COLA ICECEK A.S.
DOGAN SIRKETLER GRUBU HOLDING A.S.
IS FINANSAL KIRALAMA A.S.
LOGO YAZILIM SANAYI VE TICARET A.S..
PETKIM PETROKIMYA HOLDING. A.S.
TURK PRYSMIAN KABLO VE SISTEMLERI A.S.
SEKERBANK TURK ANONIM SIRKETI
TAV HAVALIMANLARI HOLDING A.S.
TURKIYE SINAI KALKINMA BANKASI A.S.
TURK TELEKOMUNIKASYON A.S.
VAKIF MENKUL KIYMETLER YATIRIM ORT. A.S.
TURCAS PETROL A.S.
PARK ELEKTRIK URETIM MAD. SAN. VE TIC. A.S.
AYGAZ A.S.
ALBARAKA TURK KATILIM BANKASI A.S.
YAZICILAR HOLDING A.S.
IHLAS HOLDING A.S.
IHLAS EV ALETLERI IMALAT SAN. VE TIC. A.S.
DOGUS OTOMOTIV SERVIS VE TIC. A.S.
MENSA SINAI TICARI VE MALI YATIRIMLAR A.S.
PINAR SUT MAMULLERI SAN. A.Ş.
EGELI & CO YATIRIM HOLDING A.S.
TURKIYE HALK BANKASI A.S.
IS YATIRIM MENKUL DEGERLER A.S.
GLOBAL YATIRIM HOLDING A.S.
GARANTI FACTORING HIZMETLERI A.S.
ENKA INSAAT VE SAN. A.S.
PINAR ENTEGRE ET VE UN SANAYII A.S.
BOYNER BUYUK MAGAZACILIK A.S.
ASELSAN ELEKTRONIK SANAYI VE TIC. A.S.
IS GAYRIMENKUL YATIRIM ORTAKLIGI A.S.
AVERAGE
226
Board of Directors
2007 2008 2009 2010 2011 2012
7,80
7,93
7,93 7,93 7,96 8,59
7,34
7,63
7,63 7,56 7,68 8,59
6,30
6,57
6,62 7,05 7,67 9,38
6,10
6,10
6,51 6,87 7,38 8,95
6,27
7,73
6,73 7,10 7,24 8,89
7,28
7,69
7,74 7,74 8,27 8,74
7,94
7,81
7,53 7,52 7,46 7,61
6,64
6,71 6,72 6,75 8,17
7,45
7,47 7,46 7,47 7,81
6,30
6,30 6,43 6,43 8,34
6,28
6,31 6,42 6,58 7,38
6,74
7,13 7,74 7,82 7,83
6,37 6,73 6,76 8,69
6,85 6,85 6,83 8,27
6,28 6,53 7,13 7,13
6,66 7,03 7,28 8,76
7,16 7,11 7,13 7,98
6,01 6,54 6,86 7,66
6,12 6,09 6,10 7,32
7,42 7,82 8,10 8,18
7,77 8,40 8,44 8,73
7,76 8,05 8,09 8,10
6,56 6,73 6,79 8,47
6,58 7,79 7,97 8,43
6,11 6,54 6,99
7,29 7,34 7,88
6,93 6,94 8,66
7,62 7,95 7,62
6,39 6,42 8,27
7,17 7,42 7,92
7,36 7,40 7,92
6,62 7,44
5,71 5,89
6,86 8,76
7,79 8,51
7,17 7,20
8,68 8,84
7,39 8,26
8,03
8,92
8,82
7,60
8,64
8,26
7,00 7,07 6,92 7,13 7,27 8,15
�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
APPENDIX II: Corporate Governance Rating Scale
Rating Explanation
9-10
The company performs very good in terms of Capital Markets Board’s corporate
governance principles and has qualified to be included in the ISE’s (Istanbul Stock
Exchange) Corporate Governance Index. It has identified and actively managed all
significant corporate governance risks through comprehensive internal controls and
management systems. The company’s performance is considered to represent best
practice, and it had almost no deficiencies in any of the areas rated.
7-8
The company performs good in terms of Capital Markets Board’s corporate governance
principles. It has, to varying degrees, identified all its material corporate governance risks
and is actively managing the majority of them through internal controls and management
systems. During the rating process, minor deficiencies were found in one or two of the
areas rated.
6
The company performs fair in terms of Capital Markets Board’s corporate governance
principles. It has, to varying degrees, identified the majority of its material corporate
governance risks and is beginning to actively manage them. Management accountability
is considered in accordance with national standards but may be lagging behind
international best practice. During the ratings process, minor deficiencies were identified
in more than two of the areas rated.
4-5
The company performs weakly as a result of poor corporate governance policies and
practices. The company has, to varying degrees, identified its minimum obligations but
does not demonstrate an effective, integrated system of controls for managing related
risks. Assurance mechanisms are weak. The rating has identified significant deficiencies
in a number (but not the majority) of areas rated.
<4
The company performs very weakly and its corporate governance policies and practices
are overall very poor. The company shows limited awareness of corporate governance
risks, and internal controls are almost non-existent. Significant deficiencies are apparent
in the majority of areas rated and have led to significant material loss and investor
concern.
REFERENCES
Akbulak Y. (2011). Türk Sermaye Piyasasında Esaslı Bir Devrim: Kurumsal Yönetim
İlkeleri, Mali Cozum, 108, s.111-138.
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�International Conference on Economic and Social Studies (ICESoS’13), 10-11 May, 2013, Sarajevo
Akdoğan N. & Akdoğan M. U. (2011). The Comparative Analysis of the Harmony of the
Turkish Commercial Code Regulations Related to Corporate Governance Principles
with the Corporate Governance Principles Issued by Capital Market Board.
Accounting and Auditing Review, 11 (35), 1-31.
Akdoğan Y. E. & Boyacıoğlu M. A. (2010). Corporate Governance in Turkey: An
Overview. Selçuk Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, Issue:24, 11-30.
Ararat, M. & Ugur, M. (2003). Corporate Governance in Turkey: an overview and some
policy recommendations. Corporate Governance, 3 (1), 58-75.
Ararat, M. & Yurtoglu, B. (2006). Corporate Governance in Turkey: an Introduction to the
Special Issue. Corporate Governance, 4 (4), 201-206.
Arsoy, A. P. & Crowther D. (2008). Corporate Governance in Turkey: Reform and
Convergence. Social Responsibility Journal, 4 (3), 407-421.
Capital Markets Board of Turkey. (2003). Corporate Governance Principles,
http://www.cmb.gov.tr/displayfile.aspx?action=displayfile&pageid=84&fn=84.pdf&su
bmenuheader=-1
Corporate Governance Association of Turkey, http://www.tkyd.org/en/
Ergin E. (2012). Corporate Governance Ratings and Market Based Financial Performance:
Evidence from Turkey. International Journal of Economics and Finance,4 (9), 61-68.
Gurbuz, A.O., Aybars, A. & Kutlu, O. (2010). Corporate Governance and Financial
Performance with a Perspective on Institutional Ownership: Empirical Evidence from
Turkey”, JAMAR, 8 (2), 22-37
Istanbul Stock Exchange, http://www.ise.org/
Mandacı, P.E. & Gumus, G.K. (2010). Ownership Concentration, Managerial Ownership
and Firm Performance: Evidence from Turkey. South East European Journal, 5 (1),
57-66.
Needles, B. E., Turel A., Sengur E. D. & Turel A. (2012). Corporate Governance in
Turkey: Issues and Practices of High Performance Companies. Accounting and
Management Information Systems, 11 (4) 510-531.
Sakarya Ş. (2011). The Rating Scores of the Enterprises in Scope of the ISE Corporate
Governance Index and the Analysis of Relations Between the Stock Returns with the
Event Study Method. ZKU Journal of Social Sciences, 7 (13).147-162.
Sengur, E. D. (2011). Do corporate Governance Index Companies Outperform Others?
Evidence from Turkey. International Journal of Business and Social Sciences, 2 (14),
254-260.
Toraman, C. & Abdioğlu H. (2008). Weak and Strong Sides of Companies which are at
ISE
Yüksel, C. (2008). Recent Developments of Corporate Governance in the Global Economy
and the New Turkish Commercial Draft Law Reforms. Journal of International
Commercial Law and Technology, 3 (2), 101-111.
Turkish Industry & Business Association (TUSIAD). 2002. Corporate Governance Code of
Best Practices: Composition and Functioning of the Board of Directors,
http://www.tusiad.org/bilgi-merkezi/raporlar/kurumsal-yonetim-en-iyi-uygulamakodu--yonetim-kurulunun-yapisi-ve-isleyisi/
Yüksel, C. (2008). Recent Developments of Corporate Governance in the Global Economy
and the New Turkish Commercial Draft Law Reforms. Journal of International
Commercial Law and Technology, 3 (2), 101-111.
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�
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1534
Title
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Improvement of Corporate Governance Practices of İstanbul Stock Exchange (ISE) Corporate Governance Index Companies
Author
Author
DILEK SENGUR, Evren
Abstract
A summary of the resource.
A series of corporate scandals highlighted the corporate governance issue all around the world. Like other countries, Turkey has adopted strong regulatory framework for corporate governance in the last decade. The purpose of this study is to analyze the improvement in corporate governance practices of İstanbul Stock Exchange Corporate Governance Index Companies between the years of 2007 and 2012. With this purpose corporate governance rating reports of companies were examined. Based on the examination of corporate governance rating reports; it is observed that overall corporate governance ratings have been gradually increasing year by year. Further analysis demonstrates that while stakeholders section is the most strength side, board of directors is the weakest part of Corporate Governance Index Companies. Nonetheless, in 2012 a sharp increase in the ratings of board of directors section was observed thanks to enactment of new Commercial Code and enforcement of Communiqué Serial : IV, No:56. Keywords: Corporate Governance, Corporate Governance Index, Corporate Governance Rating, İstanbul Stock Exchange, Capital Market Board of Turkey.
Publisher
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International Burch University
Date
A point or period of time associated with an event in the lifecycle of the resource
2013-05-10
Keywords
Keywords.
Article
PeerReviewed
Identifier
An unambiguous reference to the resource within a given context
ISSN 978-9958-834-23-3
-
https://omeka.ibu.edu.ba/files/original/cd5dbeb4f65df56089578d00cbaafdb3.pdf
64b7ada522937f040fc3d14a440c17a6
PDF Text
Text
International Conference on Economic and Social Studies, 10-11 May, 2013, Sarajevo
In The Process of Global Crisis the Importance of
Tourism in Decreasing Regional Development
Differences: An Evaluation of Kastamonu Province in
Turkey
Serkan Dilek
Kastamonu University, Kastamonu, Turkey
serkan.dilek@gmail.com
Orhan Kandemir
Kastamonu University, Kastamonu, Turkey
okandemir@kastamonu.edu.tr
The possibilities of transferring sources to decrease regional development
differences by public authorities have been limited in the process of global
crisis. Kastamonu Province, that was studied in our study, has occupied
47th place between 81 Provinces according to socio-economic
development ranking in The State Planning Organization* 2011 data. Using
tourism potential of Kastamonu Province, that has important tourism
potential according to SWOT analysis done in this study, will accelerate
socio-economic development of Province. In the process of Global crisis,
evaluating tourism potentials successfully in less developed regions such as
Kastamonu province will provide opportunity to remove regional
development differences without using more public sources.
Keywords: SWOT Analysis, Regional Development Differences, Tourism
Economy, Socio-Economic Development, Global Crisis.
* The State Planning Organization was reorganized as the Ministry of
Development in June 2011.
256
�
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Extent
The size or duration of the resource.
1620
Title
A name given to the resource
In The Process of Global Crisis the Importance of Tourism in Decreasing Regional Development Differences: An Evaluation of Kastamonu Province in Turkey
Author
Author
DILEK, Serkan
KANDEMIR, Orhan
Abstract
A summary of the resource.
The possibilities of transferring sources to decrease regional development differences by public authorities have been limited in the process of global crisis. Kastamonu Province, that was studied in our study, has occupied 47th place between 81 Provinces according to socio-economic development ranking in The State Planning Organization* 2011 data. Using tourism potential of Kastamonu Province, that has important tourism potential according to SWOT analysis done in this study, will accelerate socio-economic development of Province. In the process of Global crisis, evaluating tourism potentials successfully in less developed regions such as Kastamonu province will provide opportunity to remove regional development differences without using more public sources. Keywords: SWOT Analysis, Regional Development Differences, Tourism Economy, Socio-Economic Development, Global Crisis. * The State Planning Organization was reorganized as the Ministry of Development in June 2011.
Publisher
An entity responsible for making the resource available
International Burch University
Date
A point or period of time associated with an event in the lifecycle of the resource
2013-05-10
Keywords
Keywords.
Article
PeerReviewed
Identifier
An unambiguous reference to the resource within a given context
ISSN 2303-4564