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The determinants of board size and composition: Evidence from the UK

Guest, P (2008) The determinants of board size and composition: Evidence from the UK Journal of Corporate Finance, 14 (1), 4. pp. 51-72.

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This paper examines the trends and determinants of board structure for a large sample of UK firms from 1981 to 2002. We extend the predominantly US based literature in a number of important ways. Firstly, a comparative analysis of the UK and US legal and institutional settings leads us to hypothesize that UK boards will play a weaker monitoring role and hence board structures will not be determined by monitoring related factors. Our evidence supports this conjecture, showing that board structure determinants differ in predictable ways across different institutional settings. Secondly, in contrast to recent US mandatory reforms, UK reforms have been voluntary. As such they provide an interesting comparison, being arguably more effective than a mandatory approach by allowing firms to choose board structures most appropriate for their own needs. Our results support this point of view. Although the UK reforms do have a significant impact on board structures, a large number of firms choose not to comply, and those that do appear to do so for strong economic reasons. The reforms also appear to reduce the ability of well performing CEOs to influence board structures.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
Guest, P
Date : 29 February 2008
DOI : 10.1016/j.jcorpfin.2008.01.002
Uncontrolled Keywords : Board size; Board composition; UK; US; Corporate governance; Cadbury; Hampel
Additional Information : NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Corporate Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Corporate Finance, 14(1), February 2008, DOI 10.1016/j.jcorpfin.2008.01.002.
Depositing User : Symplectic Elements
Date Deposited : 02 Apr 2014 14:13
Last Modified : 31 Oct 2017 14:42

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