In Letter but not in Spirit: An Analysis of Corporate Governance in the UK

73 Pages Posted: 13 Oct 2005  

Sridhar Arcot

ESSEC Business School - Finance Department

Valentina Bruno

American University - Department of Finance and Real Estate

Date Written: May 2006

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 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

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

Sridhar Arcot (Contact Author)

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Valentina Giulia Bruno

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

HOME PAGE: http://www.american.edu/kogod/faculty/bruno.cfm

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