Revisiting the Relationship between Corporate Governance and Firm performance: Evidence from British Manufacturing Firms

Sameer Al Johani () and Adnan Atm ()
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Sameer Al Johani: Taibah University, Medina, Saudi
Adnan Atm: BGMEA University of Fashion and Technology, Dhaka, Bangladesh

Acta Universitatis Bohemiae Meridionales, 2022, vol. 25, issue 1, 7-32

Abstract: This research looked at the link between corporate governance (CG) proxies and corporate financial performance (CFP) in the post financial crisis period for FTSE 350 enlisted firms while also revisiting the relevance of the agency theory to corporate governance mechanisms in the United Kingdom. OLS regression, Generalized Method of Moments (GMM) and Hausman test were applied to panel dataset of 230 FTSE 350 UK manufacturing firms over the period 2014-2018. The findings reveals that, with the exception of CEO duality and Firms growth where the Tobin's Q and Return on Asset (ROA) were the dependent variables respectively, other corporate governance mechanism such as board size and board independence, firm size, leverage, and growth had statistically insignificant effects on CFP. The results are robust when utilizing GMM estimation for adjusting for potential simultaneity and endogeneity problem. Contrast to prior findings in CG field this study suggest that firm internal CG traits do not play a substantial role in determining CFP in the UK context, and so provide more robust conclusions than prior studies in the field.

Keywords: Corporate governance; FTSE 350; corporate financial performance; generalized method of moments (GMM); United Kingdom (search for similar items in EconPapers)
JEL-codes: G34 L25 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:boh:actaub:v:25:y:2022:i:1:p:7-32

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