Governance structures, size and corporate performance in UK firms

Abstract

Analyses the extent of Cadbury compliance and its impact on corporate performance in the UK. Comparing 1992 and 1995, we find that UK public companies have, in general, complied with the Cadbury Committee's Code of Best Practice and have adopted the recommended governance structures. However, compliance is more common among larger firms. Thus we find that duality is less common, firms tend to have more than three non-executive directors and that there has been an almost universal adoption of board subcommittees such as the remuneration and audit committees. However, little evidence is found to suggest either that the board characteristics recommended by Cadbury lead to improved performance or that moving towards them improves performance. The only governance mechanism which does positively affect performance is the presence of remuneration and audit committees.

Does the South African stock market value an independent dual board leadership structure?

“…Using 25 Canadian firms from 1976 to 2000, Bozec (2005) reports that CEO duality has no impact on market valuation. This is consistent with the results of previous studies (Baliga et al, 1996;Brickley et al, 1997;Rhoades et al, 2001;Vafeas and Theodorou, 1998;Laing and Weir, 1999;Weir and Laing, 2000;Sanda et al, 2010), which suggest that CEO duality has no impact on market valuation.…”

“…The chairman of the board is responsible for managing the board. These may typically include nominating new board members, reviewing the performance of senior management, setting agenda for board meetings, and settling conflicts which may arise within the board (Laing and Weir, 1999). In contrast, the CEO is responsible for the day-to-day management of the company, including implementing board decisions.…”

Effect of Board Diversity on Corporate Governance Structure and Operating Performance: Evidence from the UK Listed Firms

“…However, the relationship between audit committee (AUCOM) and operating performance (ROA) is not significant in individual years except for model 1 of the pooled data when audit committee exerts significant positive impact on operating performance. This result supports H3 and agrees to the findings in studies of Laing and Weir (1999), Bouaziz (2012) and Kallamu and Saat (2015) which indicated that audit committee is significantly positively associated with financial performance. In addition, the board diversity (BDV) is found to be significant to operating performance (ROA) in model 2 in 2010 as well as for the pooled data.…”

“…Using UK firms, Laing and Weir (1999) found out that the presence of audit committee has positive impact on corporate performance. In the same vein, Bouaziz (2012) who used Tunisian firms reported that audit committee has positive impact on financial performance.…”

“…Audit committee is one of such committees and it is highly regarded in corporate governance (Cadbury1992). The audit committee is critical to corporate accountability and by its responsibility, it enhances confidence in financial statements (Laing & Weir 1999). The committee monitors the preparation of financial statement by the directors and reviews significant judgments made in the financial statements.…”