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Internal corporate governance mechanisms and corporate performance: evidence for UK firms

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  • Chrisostomos Florackis

Abstract

This study investigates the relationship between internal corporate governance mechanisms and corporate performance for a large sample of UK firms. The aim is to extend the existing literature on firm performance by empirically investigating the role of debt-maturity structure of firms and managerial compensation in affecting corporate performance. Also, the study attempts to provide new insights on the subject by considering potential interaction effects between managerial ownership and other governance mechanisms available to firms. The results support the existence of a non-linear impact of both managerial ownership and managerial compensation on company performance. Debt-maturity structure is also found to be significantly related to performance. Finally, there is strong evidence that managerial ownership and managerial compensation work as substitute mechanisms in mitigating agency problems and, therefore, generating good performance.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.

Volume (Year): 1 (2005)
Issue (Month): 4 (July)
Pages: 211-216

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Handle: RePEc:taf:apfelt:v:1:y:2005:i:4:p:211-216

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References

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  1. Chrisostomos Florackis, 2008. "Agency costs and corporate governance mechanisms: evidence for UK firms," International Journal of Managerial Finance, Emerald Group Publishing, vol. 4(1), pages 37-59, January.
  2. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
  3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  4. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
  5. Marc Goergen & Luc Renneboog, 1999. "Strong Managers and Passive Institutional Investors in the UK," Working Papers 1999.21, Fondazione Eni Enrico Mattei.
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Cited by:
  1. Florackis, Chrisostomos & Kostakis, Alexandros & Ozkan, Aydin, 2009. "Managerial ownership and performance," Journal of Business Research, Elsevier, vol. 62(12), pages 1350-1357, December.
  2. Chrisostomos Florackis & Aydin Ozkan, 2006. "What Reduces the Impact of Managerial Entrenchment on Agency Costs? Evidence for UK Firms," Discussion Papers 06/03, Department of Economics, University of York.
  3. Cristina Boþa-Avram, 2012. "Managerial Ownership, Board Structure And Firm’S Performance: A Review Of Main Findings," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4, pages 648-656, December.
  4. Marco Allegrini & Giulio Greco, 2013. "Corporate boards, audit committees and voluntary disclosure: evidence from Italian Listed Companies," Journal of Management and Governance, Springer, vol. 17(1), pages 187-216, February.

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