Does Corporate Governance Matter? New Evidence from the United Kingdom

24 Pages Posted: 1 Nov 2008

See all articles by Iain Clacher

Iain Clacher

University of Leeds - Leeds University Business School (LUBS)

Elirehema Joshua Doriye

Independent

David Hillier

University of Strathclyde - Department of Accounting and Finance

Date Written: November 1, 2008

Abstract

Using a governance index derived explicitly from the main recommendations of the London Stock Exchange Combined Code, we find that stronger and more explicit corporate governance systems are associated with increased firm value and performance, as well as lower levels of capital expenditure and institutional shareholdings. While overall corporate governance is important, not all governance characteristics of the firm have the same effect. Whereas ownership and remuneration policies improve corporate performance, the quality of disclosure and audit is a more important driver of corporate value and capital expenditure. Board structure, which is the most frequent topic of research in corporate governance, is shown to have no impact on performance, value, investment or institutional ownership.

Keywords: Corporate Governance, Firm Performance, Corporate Governance Index, Investment, Institutional Shareholdings, Comply or Explain

JEL Classification: G34

Suggested Citation

Clacher, Iain and Doriye, Elirehema Joshua and Hillier, David, Does Corporate Governance Matter? New Evidence from the United Kingdom (November 1, 2008). Available at SSRN: https://ssrn.com/abstract=1293188 or http://dx.doi.org/10.2139/ssrn.1293188

Iain Clacher

University of Leeds - Leeds University Business School (LUBS) ( email )

Leeds LS2 9JT
United Kingdom

Elirehema Joshua Doriye

Independent

No Address Available

David Hillier (Contact Author)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 330 4809 (Phone)
44 0141 330 4442 (Fax)

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