Compliance or non‐compliance during financial crisis: Does it matter?

Ahmad, Sardar; Akbar, Saeed; Kodwani, Devendra; Halari, Anwar and Shah, Syed Zubair (2023). Compliance or non‐compliance during financial crisis: Does it matter? International Journal of Finance and Economics, 28(3) pp. 2348–2366.



This paper investigates whether shareholder value is affected by non‐compliance with the prescriptions of a principle‐based ‘comply or explain’ system of corporate governance in the context of the global financial crisis of 2007–2009. Using System Generalized Method of Moments estimates to control for different types of endogeneity, the main findings of this paper suggest that non‐compliance with the UK Corporate Governance Code adversely affects shareholder value. Furthermore, ex‐post estimates reveal that compliance with certain corporate governance mechanisms is more beneficial than others. With regard to this, compliance with provisions related to board independence is more important than complying with performance‐related pay requirements of the code. These findings have implications for policy makers and financial institutions regarding the usefulness of compliance with a prescribed code of corporate governance, specifically during periods of financial distress.

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