SOCIAL RESPONSIBILITY OF A STOCK EXCHANGE: CORPORATE GOVERNANCE AT BORSA ISTANBUL

Accentuated intraday volatility and uncertainty leads to mispricing, inefficiency, and the potential unfair treatment of some market participants. As an important financial institution, the stock exchange is required to find mechanisms to reduce volatility for good corporate governance and for social responsibility. In this paper, one such mechanism, closing call auction, is explored in the actively traded industrials sector of the emerging Borsa Istanbul. Evidence of the successful implementation of the mechanism is provided. Volatility decreases and efficiency of the prices increases after the implementation of the closing call auction. The exchange executives' positive engagement in good corporate governance is documented and is suggested to other stock exchanges as a social responsibility instrument.