[Corporate Governance Characteristics and Firm Performance: Evidence from UK FTSE 350 (2008-2010)]

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Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

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Table of Contents

CHAPTER 3: METHODOLOGY AND DESCRIPTIVE STATISTICS5

Sample and Data Sources5

U.K. Regulatory Requirements and Corporate Governance Scorecard5

Data Source6

Sample Selection7

Descriptive Statistics of Corporate Governance Score9

Description of Corporate Governance Score9

Industry Composition9

New Firms and Corporate Governance Score Change12

Survivorship Problem17

Descriptive Statistics of Variables20

CHAPTER 4: EMPIRICAL ANALYSIS26

Determinants of Corporate Governance26

OLS Estimates of the Determinants of Corporate Governance26

OLS Estimates of the Determinants of Change in Corporate Governance30

Corporate Governance and Firm Value31

Corporate Governance and Firm Value: Empirical Results31

Categories and Factors Associated with Firm Value32

Results for Sub-scores and Reduced Indices32

Individual Corporate Governance Element34

Corporate Governance, Free Cash Flow, and Firm Value: Empirical Results35

Analysis of the Relationship among Corporate Governance, Free Cash Flow and Firm Value, Using Simultaneous Equations System3

Relationships among the Control Mechanisms4

Firm Value and the Control Mechanisms13

Summary18

CHAPTER 5: CONCLUSION20

Summary of Research Findings20

Contributions and Implications21

Limitations and Future Research23

REFERENCES25

APPENDIX26

Chapter 3: Methodology and Descriptive Statistics

In this chapter, I discuss the data and descriptive statistics. The chapter starts with a description of U.K. regulatory requirements, the data and the method adopted to construct the sample in this chapter. In this chapter, descriptive statistics of corporate governance score are described. In the last section, the measures for the dependent, independent and control Variables that will be used in the study are described.

Sample and Data Sources

U.K. Regulatory Requirements and Corporate Governance Scorecard

The U.K. Code is a set of recommendations of best practice to improve governance and promote shareholder interests. Companies listed in the U.K. are required by the London Stock Exchange to disclose in their annual reports either their compliance with the guidelines or to give reasons for non-compliance.

My sample period covers 2007 to 2010. I choose 2007 because this is the first year after the adoption of the U.K. Combined Code (1998). The U.K. Code (2003) includes many recommendations from the Higgs and Smith Reports. The core principles of the Combined Code (1998) remain unchanged in the revised Code, with only a new addition relating to board performance evaluation. The updated Code (2006) incorporates a small Number of changes to the Code (2003). The main changes made to the 2003 Combined Code include: (1) to allow the company chairman to be a remuneration committee member; (2) to provide shareholders a 'vote withheld' option on proxy appointment; and (3) to recommend publication on their website the details of proxies lodged at a general meeting where votes are taken on a show of hands.

Since the scorecard is based largely on the U.K. Code (1998), I will briefly discuss its regulatory requirements and the inputs to the governance scoring ...