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The purpose of this paper is to investigate the price reaction to corporate governance rating announcements at the Istanbul Stock Exchange and to identify the factors which could be driving the results. Using an event study analysis framework, the cumulative abnormal returns (AR) are calculated for various event windows surrounding the announcement day for each firm. The average AR is 0.5% on announcement day, followed by all positive average cumulative ARs for the next 18 days following the announcement. In the multivariate regression analysis, a number of variables are used to proxy for factors suggested as relevant by the agency theory and the corporate governance literature; such as the size of the Audit Committee, the size of the Board of Directors, Corporate Governance Rating of each firm, number of non-executive members on the board, percentage of firm’s stock traded on the market, number of blockholders, family ownership, the price-earnings ratio, the market-to-book ratio and firm size. Audit committee size (P: 0.012) and board size (P: 0.043) together explained 32% of the variation in announcement day returns (F: 5.215, P: 0.018). Surprisingly, the corporate governance rating per se was not found to be significant. Overall, the price reaction on announcement day tends to be higher for firms with larger boards and smaller audit committees.