73 Pages Posted: 13 Oct 2005
Date Written: May 2006
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 perform a detailed analysis of both the degree of compliance with the provisions of the corporate governance code of best practice (Combined Code), and the explanations given in case of non-compliance. We rank the quality of explanations based on their information content. We find an increasing trend of compliance with the provisions of the Combined Code, but also a frequent use of standard and uninformative explanations when departing from best practice, which highlights a common conformity with the letter but not the spirit of the Code.
Keywords: Corporate Governance, Comply or Explain, Combined Code
JEL Classification: G30, G34
Suggested Citation: Suggested Citation
Arcot, Sridhar and Bruno, Valentina, In Letter but not in Spirit: An Analysis of Corporate Governance in the UK (May 2006). Available at SSRN: https://ssrn.com/abstract=819784 or http://dx.doi.org/10.2139/ssrn.819784