Corporate governance : a study of the corporate governance of quoted firms in the United Kingdom
Sinha, Rajeeva (1998) Corporate governance : a study of the corporate governance of quoted firms in the United Kingdom. PhD thesis, University of Warwick.
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Official URL: http://webcat.warwick.ac.uk/record=b1366690~S1
The purpose of this study is to examine the corporate governance, of firms quoted on
the stock market. An important contribution of the thesis is the derivation of the
conceptual framework for analysing corporate governance which places conduct at the
centre of the understanding of corporate governance. I propose a conceptual
framework by extending the concept of incomplete contracts to include expost
observability/verifiability of the contracts between shareholders and managers.
Strategic co-operation between shareholders and managers is only feasible in the
procedural justice mode. Deliberation between the contracting parties is identified as
the centre piece of corporate governance. Managerial decision behaviour is shown to
be endogenous to the corporate governance framework.
A number of empirical issues emerge from the conceptual framework. We examine
two of these using panel data techniques and data on 218 manufacturing firms and the
complete list of 44 authorised financial institutions observed over a six year period,
1987-88 to 1994-95. I examine whether there is a case for deliberation in a corporate
governance framework given that the procedural justice mode is the only basis of
strategic co-operation. The second issue that was evaluated relates to the implications
of the adoption of a dominant strategy by shareholders given that the UK corporate
governance framework places a primary reliance on the market for corporate control.
My evidence shows that firm-specific factors are important in control changes as
measured by top management turnover. Thus the crucial recommendation of the
procedural justice based corporate governance framework, that deliberation will have
to be an integral component of the corporate governance framework, has been
validated by the empirical analysis. In the absence of strategic co-operation based on
procedural justice mode the conceptual framework proposed envisages the adoption of
dominant strategy by shareholders. The consequence of this will be an emphasis on
power relations in the top management team in a bid to minimise their human capital
risk. There will be ambiguity in the control changes as reflected by top management
turnover. I also find evidence that demonstrates the role of power in control changes.
Control changes as reflected by turnover of all directors and executive directors, in all
the estimates, are found to be consistently related to CEO changes. Financial
performance indicators are consistently inversely related to directors turnover in the
manufacturing sector but their impact on directors as reflected by elasticity measures
are very low. The effect of financial performance on the likelihood of CEO change is
not sgnificant for all the measures used in the study. Thus the evidence shows that
there is little accountability in the processes of corporate governance as reflected in
the top management turnover.
The conceptual framework proposed is not in conflict with the principal and agents
framework. The empirical results have also been used to evaluate the significance of
individual variables and compare and contrast with the findings of the existing
literature on top management turnover.
Analysis of the regulatory arrangement for authorised financial institutions has shown
that the central banks act as the centrepiece of the control structure in the financial
services sector. The role of the central banks in terms of corporate governance,
however, has been to replace the conventional governance goal of shareholder wealth
maximisation with concerns for depositors security and the stability of the financial
system. There are very few studies on the functioning of corporate governance
mechanisms in banks. Researchers are also increasingly interested in how corporate
governance mechanisms in general, vary in different legal and regulatory
environments. The study of the manufacturing and financial services sectors of the
same country provides valuable evidence for this comparison of corporate governance
under differing legal and regulatory arrangements.
|Item Type:||Thesis or Dissertation (PhD)|
|Subjects:||H Social Sciences > HD Industries. Land use. Labor|
|Library of Congress Subject Headings (LCSH):||Corporate governance -- Great Britain, Manufacturing industries -- Great Britain|
|Official Date:||June 1998|
|Institution:||University of Warwick|
|Theses Department:||Warwick Business School|
|Supervisor(s)/Advisor:||Stoneman, Paul ; McGee, John, Ph. D.|
|Extent:||vi, 273 leaves|
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