Corporate governance and firm financial performance in UK financial institutions

This thesis consists of four published empirical studies on the effect of three board monitoring committees (namely: audit, remuneration and nomination committees) and board diversity on the performance of UK financial institutions. The collapse of large financial institutions and non-financial firms, coupled with the global financial crisis in 2007/08, precipitated a number of corporate governance reforms in the UK. Compellingly, the continuous corporate governance reforms all recommended the formation and appointment of key board monitoring committees such as audit, remuneration and nomination, together with board diversity to help improve firms’ effectiveness. This research uniquely examined the effect of these three committees and board gender diversity on the performance of UK financial institutions during the pre/post global financial crisis era. The empirical results first indicate that the presence of the three board monitoring committees and board gender diversity have a positive and statistically significant link with the financial performance of the sampled UK financial institutions. Subsequent tests conducted during the pre- and post-2007/08 financial crisis periods show mixed results. Specifically, the pre-crisis results show that the establishment of these monitoring board committees (audit, remuneration and nomination) and board gender diversity remained positive and statistically significant before the 07/08 financial crisis. However, the post-crisis period results were not statistically significant, indicating that the 07/08 financial crisis appeared to have affected the financial performance of the financial institutions examined. Overall, the thesis provides practical implications for governments, policymakers and regulatory authorities by indicating the importance of monitoring committees and board gender diversity for corporate success. The findings are consistent with agency, stakeholder and resource dependence theories and group effectiveness theories. This suggests that board committees and board gender diversity enhance board monitoring, bring a diversity of ideas and ultimately improve firm performanceTämä väitöskirja sisältää neljä aiemmin julkaistua empiiristä tutkimusta, joissa tarkastellaan hallituksen valvontakomiteoiden (tilintarkastus-, palkkaus- ja nimitysvaliokunnan) sekä hallituksen sukupuolijakauman vaikutuksia rahoituslaitosten suoriutumiseen Yhdistyneessä kuningaskunnassa. Suurten rahoituslaitosten ja yritysten romahdus sekä maailmanlaajuinen finanssikriisi vuosina 2007/08 sai aikaan suuria muutoksia yritysten hallinnointijärjestelmään Yhdistyneessä kuningaskunnassa. Uudistusten yleinen suositus oli juuri hallituksen valvontakomiteoiden perustaminen sekä hallituksen sukupuolten moninaisuuden huomiointi, kun tavoitteena on yrityksen tehokkuuden parantaminen. Tässä väitöskirjassa tarkasteltiin ensimmäistä kertaa kolmen edellä mainitun komitean ja hallituksen monimuotoisuuden vaikutuksia Yhdistyneen kuningaskunnan rahoituslaitosten suoriutumiseen ennen maailmanlaajuista finanssikriisiä ja sen jälkeen. Empiiriset tulokset osoittivat, että hallituksen valvontakomiteoiden olemassaololla ja niiden sukupuolten välisellä moninaisuudella oli positiivinen ja tilastollisesti merkittävä vaikutus otokseen valittujen rahoituslaitoksien taloudelliseen suoriutumiskykyyn. Kuitenkin erilliset testit, jotka suoritettiin aineistolla ennen ja jälkeen 2007/08 finanssikriisin, antoivat myös eriäviä tuloksia. Erityisesti kriisiä edeltävät tulokset osoittivat, että valvontakomiteoiden (tilintarkastus-, palkkaus- ja nimityskomitea) perustaminen ja hallituksen sukupuolten välinen moninaisuus pysyivät positiivisina ja tilastollisesti merkittävinä ennen rahoituskriisiä 07/08. Kriisin jälkeiset tulokset eivät kuitenkaan olleet tilastollisesti merkitseviä, mikä viittasi siihen, että rahoituskriisi 07/08 oli vaikuttanut tarkasteltujen rahoituslaitosten taloudelliseen suorituskykyyn. Tämä tutkimus tarjoaa hyödyllistä tietoa hallituksille, poliittisille päätöksentekijöille ja sääntelyviranomaisille osoittamalla seurantakomiteoiden ja sukupuolten välisen moninaisuuden tärkeyden yritysten menestykselle. Tulokset ovat yhdenmukaisia agentti-, sidosryhmä-, resurssiriippuvuusteorian sekä ryhmän tehokkuusteorioiden kanssa. Tämä viittaa siihen, että valvontakomiteat ja eri sukupuolten esiintyminen hallituksessa edistävät hallituksen valvontamahdollisuuksia sekä synnyttävät erilaisia ideoita, jotka lopulta johtavat yrityksen suorituskyvyn paranemiseen

Remuneration Committee governance and firm performance in UK financial firms

This paper investigates the association between the Remuneration Committee (RC) on firm performance. The research uses a data span of 63 financial institutions for a period of 12 years. Ordinary Least Square (OLS) and Random Effects (RE) regression estimations are used. The ascertained empirical results indicate that the establishment of remuneration committee by the board is positively correlated to its performance, as measured by its Return on Assets (ROA), and is also statistically significant on the Market Value (MV) of the firm. Subsequent tests conducted show that presence of an RC had a positive and statistically significant correlation during the pre/post global financial crisis on the ROA of the firm. The MV measure during the pre-crisis indicates a positive and statistically significant impact, but only positive during the post-crisis. The findings are robust across econometric models that control for different types of endogeneity. The outcome indicates that the establishment of an RC by the board assisted in achieving a positive impact on the profitability of UK financial institution

Remuneration committee governance and firm performance in UK financial firms

This paper investigates the association between the Remuneration Committee (RC) on firm performance. The research uses a data span of 63 financial institutions for a period of 12 years. Ordinary Least Square (OLS) and Random Effects (RE) regression estimations are used.The ascertained empirical results indicate that the establishment of remuneration committee by the board is positively correlated to its performance, as measured by its Return on Assets (ROA), and is also statistically significant on the Market Value (MV) of the firm. Subsequent tests conducted show that presence of an RC had a positive  and statistically significant correlation during the pre/post global financial crisis on the ROA of the firm. The MV measure during the pre-crisis indicates a positive and statistically significant impact, but only positive during the post-crisis. The findings are robust across econometric models that control for different types of endogeneity. The outcome indicates that the establishment of an RC by the Board assisted in achieving a positive impact on the profitability of UK financial institutions.</p

The nomination committee and firm performance: an empirical investigation of UK financial institutions during the pre/post financial crisis

This study looks at the relationship between nomination committee (NC) and the financial performance of firms among United Kingdom (UK) financial institutions. The result indicates a positive and statistically significant association between the NC of a firm and its Market Value (MV). The relationship between NC and the Return on Asset (ROA) of the firm as a measure of financial performance was positive. The second study examines the impact of NC on UK financial firms during the 2007/2008 global financial crisis. The empirical evidence gleaned highlights that firms adopting NC for corporate boards witness a positive and statistically significant impact on the ROA of the firms. There was also an inverse relationship demonstrated, in terms of financial performance on the MV of the firms during the pre-and post-global financial crisis

Gender diversity and firm value: Evidence from UK financial institutions

Purpose: The purpose of this research is first, to empirically examine if the appointment of females (Board Gender Diversity) onto the corporate boards of UK financial institutions can improve the firm’s value. The second purpose is to examine if having females on the boards of UK financial institutions can impact the firm’s value during the pre/post global financial crisis situation.Design/methodology/approach: The paper uses secondary data obtained from DataStream covering 63 financial institutions over a period of 12 years. A number of additional statistical estimations, including Random Effects and Fixed Effects, are conducted in order to test the robustness of the findings.Findings: The outcome of this empirical research shows that the presence of females on the corporate boards of UK financial institutions has a positive and statistically significant relationship to the firm’s value. Before the financial crisis era, that is, during the pre-crisis situation (2000-2006), our evidence reveals a positive and statistically significant impact on the firm’s value. This means that women contributed significantly to the firm’s value. However, after the financial crisis period, the presence of females on the board did not make any significant effect on the firm’s value. A reasonable explanation may be that, even though the financial crisis was over from 2009 to 2011, the entire UK economy was still experiencing an economic downturn and financial firms were no exception, irrespective of whether there was female representation on any corporate board. Overall, the findings are consistent with prior studies.Originality/value: In spite of several research projects on board gender diversity (BGD), this research is unique when compared to other previous empirical works because, primarily, it will be the first time that such research will empirically ascertain board gender diversity and firm value in UK financial institutions and also during the pre/post financial crisis era. This paper contributes to the corporate governance literature by offering new insights on board diversity and firm’s value relationship. Overall, the results will help to fill any missing gaps on gender diversity and firm’s value in UK financial institutions.Keywords: Gender diversity, firm’s value, UK, financial institutions, financial crisis                                    Paper type: Research paper</p

Audit committee adoption and firm value: Evidence from UK financial institutions

Purpose: This study examines the impact of audit committee (AC) adoption on the financial value of financial institutions in the UK and also examines the impact of the establishment of an audit committee on firm value during the pre/post global financial crisis era. Design/methodology/approach: The paper embarks on a theoretical and empirical literature review on audit committee (AC) adoption and its impact on the firm’s financial value. The paper uses data from 63 financial institutions and covers a 12-year period. Findings: The empirical results indicate that the adoption of an AC by financial institutions has a positive and statistically significant impact on firm value. The results from the precrisis period also indicate the adoption of an AC makes a positive and significant contribution to firm value. However, there is no impact on firm value during the post-crisis period. Our results suggest that the entire UK economy experienced an economic downturn after the financial crisis (2009-2011) and financial firms were no exception. Research limitations/implications: Our study helps to fill research gaps on the relationships between ACs and firm value as they exist in UK financial institutions. These findings are important for policy-makers and regulators. Originality/value: To the best of our knowledge, this research is the first to conduct an empirical study of the effect of AC adoption on UK financial institutions and firm value. Second, no single study has been conducted on the effects of AC adoption and its impact on either the pre- or the post-financial crisis periods. This is the first paper to provide such empirical evidence. Keywords: Audit committee adoption, financial institutions, UK, pre- and post-financial crisis, firm’s value. Paper type: Empirical research.</p

Audit Committee Adoption and Firm Value: Evidence from UK Financial Institutions

Purpose: This study examines the impact of audit committee (AC) adoption on the financial value of financial institutions in the UK and also examines the impact of the establishment of an audit committee on firm value during the pre/post global financial crisis era.Design/methodology/approach: The paper embarks on a theoretical and empirical literature review on audit committee (AC) adoption and its impact on the firm’s financial value. The paper uses data from 63 financial institutions and covers a 12-year period.Findings: The empirical results indicate that the adoption of an AC by financial institutions has a positive and statistically significant impact on firm value. The results from the precrisis period also indicate the adoption of an AC makes a positive and significant contribution to firm value. However, there is no impact on firm value during the post-crisis period. Our results suggest that the entire UK economy experienced an economic downturn after the financial crisis (2009-2011) and financial firms were no exception.Research limitations/implications: Our study helps to fill research gaps on the relationships between ACs and firm value as they exist in UK financial institutions. These findings are important for policy-makers and regulators.Originality/value: To the best of our knowledge, this research is the first to conduct an empirical study of the effect of AC adoption on UK financial institutions and firm value.Second, no single study has been conducted on the effects of AC adoption and its impact on either the pre- or the post-financial crisis periods. This is the first paper to provide such empirical evidence

Gender Diversity and Firm Value: Evidence from UK Financial Institutions

Purpose: The purpose of this research is first, to empirically examine if the appointment of females (Board Gender Diversity) onto the corporate boards of UK financial institutions can improve the firm's value. The second purpose is to examine if having females on the boards of UK financial institutions can impact the firm's value during the pre/post global financial crisis situation. Design/methodology/approach: The paper uses secondary data obtained from DataStream covering 63 financial institutions over a period of 12 years. A number of additional statistical estimations, including Random Effects and Fixed Effects, are conducted in order to test the robustness of the findings. Findings: The outcome of this empirical research shows that the presence of females on the corporate boards of UK financial institutions has a positive and statistically significant relationship to the firm's value. Before the financial crisis era, that is, during the pre-crisis situation (2000-2006), our evidence reveals a positive and statistically significant impact on the firm's value. This means that women contributed significantly to the firm's value. However, after the financial crisis period, the presence of females on the board did not make any significant effect on the firm's value. A reasonable explanation may be that, even though the financial crisis was over from 2009 to 2011, the entire UK economy was still experiencing an economic downturn and financial firms were no exception, irrespective of whether there was female representation on any corporate board. Overall, the findings are consistent with prior studies. Originality/value: In spite of several research projects on board gender diversity (BGD), this research is unique when compared to other previous empirical works because, primarily, it will be the first time that such research will empirically ascertain board gender diversity and firm value in UK financial institutions and also during the pre/post financial crisis era. This paper contributes to the corporate governance literature by offering new insights on board diversity and firm's value relationship. Overall, the results will help to fill any missing gaps on gender diversity and firm's value in UK financial institutions

Policy Alienation and Street-level Bureaucrats' Psychological Wellbeing:The Mediating Role of Alienative Commitment

In an era of New Public Management reforms, public sector policies often create a mismatch between social and economic values that can lead to public policy alienation—professionals’ feelings of disconnection from public policies. Policy alienation can create unrest among public professionals and carry several negative repercussions for their wellbeing and work-related attitudes. The negative repercussions of policy alienation are likely to inhibit public service delivery. However, existing research on policy alienation and its consequences for street-level bureaucrats’ wellbeing is scarce. Thus, it is unknown how policymakers can curb policy disconnect and counter its negative implications. To contribute to both general policy alienation theory and practice, our study hypothesized that the two dimensions of general policy meaninglessness—client meaninglessness and societal meaninglessness—are negatively related to street-level bureaucrats’ psychological wellbeing. We hypothesize this negative relationship is due to alienative commitment. A time-lagged survey data collected from 401 public professionals and analyzed using structural equation modeling supported our hypothesized relationships. The present study extends the nomological networks of the antecedents and consequences of alienative commitment and offers important implications that can help policymakers counter the issues related to public professionals’ alienative commitment and psychological wellbeing

Fintechs and the financial inclusion gender gap in Sub-Saharan African countries

This study addresses the issue of financial innovation in developing countries, focusing specifically on the role fintechs have in closing the gender gap of financial inclusion in Sub-Saharan Africa (SSA) over the period 2011–2017. The empirical evidence is based on the multilevel tobit regression model fitted to panel data. The results of this study show that fintechs reduce the financial inclusion gender gap by mitigating the gender gap in access to and use of financial services. Furthermore, the results cast doubt on the ability of fintechs development to bridge this gap on its own, and hint on the joint importance of targeted policy initiatives aimed at directly closing the gender gap to this end. These findings have important economic policy implications and provide evidence of improved economic conditions for women in terms of financial inclusion or narrowing of the gender gap