Abstract
Corporate governance is a concept about the way in which board oversees the running of the company by its managers and how board members are in turn accountable to shareholders and the company. Good corporate governance has implications for company behavior towards employees, shareholders, customers and banks. After the financial crisis of 2007 the corporate world has become more active in preventing shareholders' interests. Several recommendations and suggestions have been made by different codes and bodies to influence the activities of both Non-Executive Directors (NEDs) and institutional shareholders to increase firm performance. The empirical evidence regarding this issue indicates a mixed result and there is still intense debate over the contribution of NEDs and institutional shareholders. For this, I analyzed the relationship between firm performance and NEDs & institutional shareholders in UK. I chose FTSE 100 companies and all the required data have been collected from Financial Times and Yahoo Finance. Several control variables (e.g. Firm Size, Leverage, Cash Flows and Capital Expenditure) have also been included in the analysis due to their close relationship with the firm performance. I developed a multiple regression model following the approach of Bhagat and Black (2002) and used SPSS program to run the multiple regression models. Both the results indicate that NED’s presence is related with firm performance and the presence of institutional shareholders is not related with firm performance. The result also suggests that NEDs are effective monitors on behalf of the shareholders and that the institutional shareholders are not. However, the results cannot be taken to conclude the relationship at this moment due to the limitations it faced and further robustness checks and research are needed to form a concrete opinion on NEDs and institutional shareholders in terms of firm performance.
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