ISE REVIEW

Regulation Influence on the Dividend Policy of the Istanbul Stock Exchange (ISE) Corporations
Cahit Adaoğlu

Abstract
In this study, the regulation influence on the dividend policy of the ISE corporations is analyzed qualitatively and quantitatively. In 1995, there has been a significant change in the dividend regulations granting extensive flexibility in the dividend policy decision making for the corporations that are traded in the ISE. The empirical results show that for the period before the 1995 regulatory change, there are no industrial differences in the cash dividend  policy due to the regulations that left little room for managers in determining their cash dividend policies. However, significant industrial differences in the cash dividend policy exist for the period after the 1995 regulatory change. Moreover, there is a substantial decrease in the median cash dividend payout ratios and ISE corporations tended to use the resources for internal financing. Additionally, ISE corporations collect back the distributed cash dividends through simultaneous rights issues for new equity. The repeated test results using net dividend payouts are similar to the results of cash dividend payouts.

On the Relationship Between Stock Prices and Macroeconomic Variables in Istanbul Stock Exchange
M. Banu Durukan

Abstract
Even though numerous studies have been conducted to shed light on the relationship between stock prices and macroeconomic variables, there still remains unsettled controversy concerning this issue. Consequently, this paper aims to deal with this outstanding issue by actually investigating the effect of macroeconomic variables on stock prices in Istanbul Stock Exchange, an emerging market, over the time period from 1986 to 1998 by utilizing the Ordinary Least Squares (OLS) method. The empirical results of the present study indicated that interest rate and economic activity variables were sufficiently adequate to explain the variations in both Turkish Lira (TL) and U.S. Dollar (US $) based indexes.

Do Derivatives Markets Constitute a Potential Threat to the Stability of the Global Financial System  
Çetin A. Dönmez & Mustafa K. Yılmaz  

Abstract
The most distinguishing developments in the last 25-30 years of global financial markets have been the increase in uncertainty and huge price fluctuations and as a consequence, the derivatives markets have grown as a natural outcome of these trends. In fact, at the beginning of 1970’s, derivatives markets appeared as an inevitable component of the efforts to improve the financial deepening process of the countries at a certain economic growth level and have shown great progress since the beginning of 1980’s. In this study, the development and importance of the derivatives markets is reviewed, the dramatic incidents leading to huge losses in the financial markets are analyzed case by case and the general factors causing these dramatic events to occur are discussed in a general context. As a conclusion, derivatives markets do not seem to create new financial risks, but change the type, structure and nature of existing risks. Therefore, it is quite obvious that a mature derivatives market on an organized exchange with a sound trading and clearing structure leads to a better risk management and better allocation of resources in the economy.

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