Although the professor Yurtoglus lecture had been read before, hearing it again with his explanations was

much better. Yurtoglu emphasized on private vs. public companies and different kinds of ownership structures. It was very interesting to see astonishingly complex ownership relations. Yurtoglu also emphasized that it is difficult to design a system for corporate governance. He said that this is not designed, this is what we have. At this point, a question comes upon surface as how to correct a historical accident. Therefore, nobody can come up with a formulaic solution to corporate governance problems. Yurtoglu stated that most of analysis in the lecture is about small companies which are going into IPO. When we consider the perks in private companies (owner-manager), at first glance it can be said that there s no problem in this because perks decrease the profit for the owner-manager. However, I would like to add another thing. Company profit is not a pie for only the owner. There are other stakeholders such as government and debt holders. When the owner increase its perks, by showing them as expense he or she can evade from taxes and decrease the societys share from the pie. Therefore, not only public companies but also small private companies should be investigated very well. On the other hand, when ownership structures are considered, it is astonishing to see that how people can innovate these available complex structures. For some companies it is impossible to understand who the real owner is. In my opinion, it is a bit about human psychology. Businessmen like being in control of their businesses. This factor makes it difficult for them to understand about the necessity and virtues of more corporate governance. On the other hand, by just selling the cash flow rights and arranging the control rights in their own benefit, they cause an asymmetry and entrenchment. Many corporate governance problems are due from cash flow vs. control rights asymmetry. The solution for this problem might be the ban of available business structures that cause the rights asymmetry. However, it is costly and difficult to separate these all business networks. The ideal thing is that the cash flow and control rights should be in same proportion for all of the shareholders. It is nearly impossible to provide this solution by the hands of governments. However, the solution might also be provided by the market itself. If stock investors become more aware of their portfolio companies and apply a discount for weak corporate governance, there might be an incentive to change this situation. Otherwise they will be entrenched by insiders and burden unnecessary losses. Actually, for public companies, ownership structures have become more transparent gradually. Market will take care of them without any frictional costs or regulation. However, for private companies, government should take on the burden to establish a more efficient tax base. This suggestion contradicts with the general tendency of more regulation for public companies. Nonetheless, it might be worth to try. For example, Cohen-Ferrell paper research on the takeover provisions and its correlation with firms performance. The research demonstrates that only 6 of these provisions are negatively correlated with firm value. If markets were more efficient and stock investors were more aware, there would be more correlation as market punishment for takeover defenses.

Professor Yurtoglus discussion in the class, which is about the correlation of stock returns and governance assumed that markets are efficient. Yurtoglu stated that there should not have been any correlation between returns and governance. However, there was an open point for his reasoning. Why do we assume that markets are efficient? There are many research results which show that markets might not be that efficient. Therefore, by awareness of investors, stock returns might also be affected. For instance, when we consider the Indian research of Black-Khanna paper which is about the correlation of share prices and corporate governance reforms, the results show that there is a gradual positive increase after the reforms. If we assume that Indian stock market is not much efficient still, it can be argued that there might be a market incentive for corporate governance returns. As a result, this lecture was beneficial for learning about some research techniques from professor Yurtoglu. Also, his speech included many tricks on quality reading of academic papers. As of my opinion about the lecture subject, I believe that market incentive is the best solution for corporate governance problems.