Fitch Report: Corporate Governance - The Turkish Perspective

Fitch Ratings says in a special report that significant emphasis is placed on corporate governance when assigning ratings to Turkish corporates. Weak corporate governance is perceived as a negative rating factor and may restrict a company's rating, regardless of how strong its financial profile may seem.

Following the wave of macroeconomic restructuring in Turkey in the wake of the 2001 financial crisis, and the privatisation trend of the last decade, many major Turkish corporates have materially improved their corporate governance practices, driven primarily by their expansion and integration within the international capital markets. Visible progress has been achieved in transparency, particularly with regard to financial information disclosure and ownership structures. However, challenges remain with regard to board quality and related-party transactions due to the predominance of family ownership, combined with wealth concentration and sometimes complex ownership structures.

Turkey is currently implementing structural reforms and striving to improve its corporate governance as part of its long-term strategy to prepare for European Union membership. Fitch expects that the long-awaited Turkish Commercial Code will increase investor focus on corporate governance and improve transparency of ownership structures as well as intra-group transactions, key areas in Fitch's corporate analytical work.

Fitch believes that companies with poor corporate governance tend to have lower ratings. While it is important to emphasise that no single factor, but rather a combination of factors, determines a rating, weak governance tends to be pervasive and have a negative impact on business operations, and consequently on financial performance - which is then reflected in the rating.

Fitch's full report 'Corporate Governance - The Turkish Perspective' is available on the agency's public website at 'http://www.fitchratings.com/'.