A COMPARATIVE ASSESSMENT OF CORPORATE GOVERNANCE RATINGS WITH MULTIPLE-CRITERIA DECISION ANALYSIS: A CASE OF BIST XKURY

This paper aims at providing the comparative analysis of corporate governance rankings, generated by major multiple-criteria decision making tools, of fifty-six firms listed as of 2014 in Borsa Istanbul Corporate Governance Index (BIST XKURY). Normally, Capital Market Board requires each BIST XKURY company to have an annual corporate governance rating provided by a licensed rating company. The rating is essentially the weighted average of four components of “shareholder relations” (), “transparency and disclosure” (), “board of directors” (), and “stakeholder relations” (). What these ratings lack is the comparative positioning of each company based on their relative distance to the best and worst performing companies. For the purpose of comparatively assessing alternative corporate governance rankings, this study makes use of four major multiple-criteria decision tools, namely; Technique for Order Preference by Similarity to an Ideal Solution (TOPSIS), Analytic Hierarchy Process (AHP), Vise Kriterijumska Optimizacija I Kompromisno Resenje (VIKOR), and Grey Relational Analysis (GRA). The study initially produced an overall average of annual corporate governance rating for each company over their lives in the index from the inception of the index in 2007 to 2014. The lists created by the selected methods exhibit conflicting rankings. The rankings produced by TOPSIS and AHP methods are rather similar to the ranking based on the raw, unprocessed ratings. The inconsistent rankings draw attention to the exercise of caution in generalizing the findings of any method, as other methods have the potential to generate contradicting lists.