The Role of Corporate Governance in Enhancing Performance and Reducing Corporate Risk:
The Case of the UK Banking Sector

Abstract

This study aims primarily to assess the overall impact of corporate governance on corporate performance and corporate risk within the UK banking industry. More specifically, it investigates the influence of corporate governance on two important dimensions, these being: how a firm is performing in terms of financial and operational issues, and corporate risk in terms of liquidity and capital. The thesis will make a contribution to the existing body of theoretical literature pertaining to corporate governance in the UK banking-sector with respect to corporate governance performance relationships. To achieve this aim, the study undertakes a comprehensive literature review from which several hypotheses on the relational significance of corporate governance and corporate performance measures are developed. It then adopts a quantitative approach in which UK bankers and capital market brokers are surveyed to obtain primary data to use for testing those hypotheses. The testing is performed using econometric models and statistical analyses, from which the corporate governance trends are revealed. The outcomes have serious implications for the managements of banking companies as they demonstrate the importance of particular corporate governance variables, and recommend attention to the size of the board, board composition, the establishment of board committees, and the ownership structure of UK banking companies. In addition, several potential areas for further research are identified and reported.