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Compliance or non‐compliance during financial crisis: Does it matter?
Ahmad, S. Kodwani, D. Halari, A. Shah, Syed Z.
Ahmad, S.
Kodwani, D.
Halari, A.
Shah, Syed Z.
Publication Date
2021
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(c) 2021 The Authors. This is an Open Access article distributed under the Creative Commons CC-BY license (http://creativecommons.org/licenses/by/4.0/)
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openAccess
Accepted for publication
17/01/2021
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Abstract
This paper investigates whether shareholder value is affected by non-compliance with the prescriptions of a principle-based ‘comply or explain’ sys-tem of corporate governance in the context of the global financial crisis of2007–2009. Using System Generalized Method of Moments estimates to controlfor different types of endogeneity, the main findings of this paper suggest thatnon-compliance with the UK Corporate Governance Code adversely affectsshareholder value. Furthermore, ex-post estimates reveal that compliance withcertain corporate governance mechanisms is more beneficial than others. Withregard to this, compliance with provisions related to board independence ismore important than complying with performance-related pay requirements ofthe code. These findings have implications for policy makers and financialinstitutions regarding the usefulness of compliance with a prescribed code ofcorporate governance, specifically during periods of financial distress.
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Citation
Ahmad S, Akbar S, Kodwani D et al (2021) Compliance or non‐compliance during financial crisis: Does it matter? International Journal of Finance and Economics. Accepted for publication.
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Article