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

Author

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  • Sameer Al Johani

    (Taibah University, Medina, Saudi)

  • Adnan Atm

    (BGMEA University of Fashion and Technology, Dhaka, Bangladesh)

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.

Suggested Citation

  • Sameer Al Johani & Adnan Atm, 2022. "Revisiting the Relationship between Corporate Governance and Firm performance: Evidence from British Manufacturing Firms," Acta Universitatis Bohemiae Meridionales, University of South Bohemia in Ceske Budejovice, vol. 25(1), pages 7-32.
    • Handle: RePEc:boh:actaub:v:25:y:2022:i:1:p:7-32
    DOI: 10.32725/acta.2022.002
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    Keywords

    Corporate governance; FTSE 350; corporate financial performance; generalized method of moments (GMM); United Kingdom;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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