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Internal and external governance mechanisms: their impact on the performance of large UK public companies.

Weir, Charlie; Laing, David; McKnight, Phillip J.

Authors

Charlie Weir

David Laing

Phillip J. McKnight



Abstract

This paper analyses the relationship between internal and external corporate governance mechanisms and the performance of UK companies within the context of the Cadbury Committee's Code of Best Practice. The results show, first, that the market for corporate control is an effective governance mechanism that may be regarded as a substitute for the other mechanisms. Second, there is a weak relationship between the internal governance mechanisms and performance. Third, there is also little evidence that with firms in the top and bottom performance deciles have different internal governance characteristics. The results therefore raise questions about the efficacy of imposing prescriptive internal governance mechanisms on companies, particularly given that the market for corporate control has been shown to be an effective means of reducing agency costs.

Journal Article Type Article
Publication Date Jun 30, 2002
Journal Journal of business finance and accounting
Print ISSN 0306-686X
Electronic ISSN 1468-5957
Publisher New Publisher Required
Peer Reviewed Peer Reviewed
Volume 29
Issue 5-6
Pages 579-611
Institution Citation WEIR, C., LAING, D. and McKNIGHT, P.J. 2002. Internal and external governance mechanisms: their impact on the performance of large UK public companies. Journal of business finance and accounting [online], 29(5-6), pages 579-611. Available from: https://doi.org/10.1111/1468-5957.00444
DOI https://doi.org/10.1111/1468-5957.00444
Keywords Corporate governance; Internal and external mechanisms

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