Corporate Governance in the UK: Is the Comply or Explain Approach Working?

Arcot, Sridhar; Bruno, Valentina; Faure-Grimaud, Antoine

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Corporate Governance in the UK: Is the Comply or Explain Approach Working?

International Review of Law and Economics, Forthcoming

31 Pages Posted: 7 Jan 2010 Last revised: 26 Jan 2010

See all articles by Sridhar Arcot

Sridhar Arcot

ESSEC Business School - Finance Department

Valentina Bruno

American University - Department of Finance and Real Estate; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Antoine Faure-Grimaud

London School of Economics; Centre for Economic Policy Research (CEPR)

Date Written: July 1, 2009

Abstract

We examine the effectiveness of the "Comply or Explain" approach to corporate governance in the UK. Using a unique database of 245 non-financial companies for the period 1998-2004, we find an increasing trend of compliance with the Combined Code, but a frequent use of standard explanations in case of non-compliance. We show how the Combined Code has been interpreted and applied, and we discuss the existence of enforcement and monitoring problems. We make recommendations so that the approach could be strengthened with greatest possible benefits.

Keywords: Corporate Governance, Comply or Explain, Combined Code

JEL Classification: K22, G34

Suggested Citation: Suggested Citation

Arcot, Sridhar and Bruno, Valentina Giulia and Faure-Grimaud, Antoine, Corporate Governance in the UK: Is the Comply or Explain Approach Working? (July 1, 2009). International Review of Law and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1532290