"Comply or Explain": market discipline and non-compliance with the Combined Code
AbstractThe "comply or explain" principle adopted by the UK's Combined Code on Corporate Governance has now been in operation for 12 years. In this paper we focus on two aspects of this regime. The first is the nature of the explanations that have been given by companies with an established record of non-compliance ("serial non-compliers") and the role of the market in permitting deviations from the Combined Code. In particular, we consider the significance of share price performance as a factor that is relevant in justifying non-compliance and the extent to which investors appear to rely on this indicator rather than engage in the more difficult task of judging the relative merits of the Code provisions against alternatives. Our approach differs from much of the research linking corporate governance with financial performance in that it focuses on the potential influence of financial performance (as measured by share price) on governance structure rather than vice versa. Our study of FTSE 100 serial non-compliers suggests that there is a "prima facie "link between share price performance and investors' tolerance of non-compliance with the Combined Code. The second issue we examine is the link between the principle of "comply and explain" and the self-regulatory status of the Code. We conclude that the benefits of flexibility generally associated with the self-regulatory status of the Code are overstated and that the Code could be integrated into mainstream company law. Copyright (c) 2006 The Authors; Journal compilation (c) 2006 Blackwell Publishing Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Corporate Governance: An International Review.
Volume (Year): 14 (2006)
Issue (Month): 5 (09)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Schmidt, Marko & Grigoleit, Jens & Nippa, Michael, 2009. "Die Auswirkungen der Unternehmenstransparenz auf den Erfolg börsenorientierter Kapitalgesellschaften in Deutschland - Eine Darstellung des aktuellen Forschungsstandes," Freiberg Working Papers 2009,01, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
- Black, Bernard & Kim, Woochan, 2012.
"The effect of board structure on firm value: A multiple identification strategies approach using Korean data,"
Journal of Financial Economics,
Elsevier, vol. 104(1), pages 203-226.
- Black, Bernard & Kim, Woochan, 2011. "The effect of board structure on firm value: a multiple identification strategies approach using Korean data," MPRA Paper 40283, University Library of Munich, Germany.
- Björn Fasterling, 2012. "Development of Norms Through Compliance Disclosure," Journal of Business Ethics, Springer, vol. 106(1), pages 73-87, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.