Internal and external governance mechanisms: their impact on the performance of large UK public companies.
Weir, Charlie; Laing, David; McKnight, Phillip J.
Phillip J. McKnight
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|
|Publisher||New Publisher Required|
|Peer Reviewed||Peer Reviewed|
|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|
|Keywords||Corporate governance; Internal and external mechanisms|
WEIR 2002 Internal and external governance