Recent work on corporate governance has highlighted the effects of corporate governance
quality on macroeconomic crises, especially in the context of South-East Asian economies.
However, the possibility of reverse causation from macroeconomic performance to corporate
governance has been overlooked. This paper aims to address this issue by examining
the relationship between macroeconomic stabilisation and corporate governance reforms
in Turkey since the 1999 and 2001 crises. We demonstrate that the prospect of macroeconomic
stability has led to extensive corporate governance reforms for two reasons. First,
recent return to macroeconomic stability has been underpinned by public governance
reforms, which spilled over to the area of corporate governance. We call this the
statutory reform effect. Second, macroeconomic stability tended to have a positive
effect on firms' investment in corporate governance quality. We call this the voluntary
reform effect. To substantiate these findings, we examine the post-1999 developments
in the following areas: (i) the effectiveness of regulatory authorities; (ii) disclosure
and transparency rules; and (iii) the quality of the enforcement regime.