UK Companies Research Articles

Greensill capital and the use of the administration process in UK company law: an incomplete case study

ABSTRACT This paper examines the Greensill collapse, with a central focus on the UK company administration procedure under the Insolvency Act 1986, exploring its broader implications for international corporate finance regulation. It analyses the events leading to Greensill’s collapse and the challenges encountered during the administration process, shedding light on stakeholder rights and the delicate balance between national and international legal frameworks. This case illustrates the intricacies of contemporary administration practices, demonstrating how administration can serve as both a rescue mechanism and as a tool for a more efficient liquidation, aimed at maximising asset value to provide better dividends for creditors. Ultimately, the paper underscores the risks inherent in financial innovation, offering lessons for the ongoing evolution as regards to the usage of administration. As the Greensill saga continues, the paper anticipates future developments, emphasising the need for systematic understanding and vigilance in complex financial scenarios.

Analysis of payment methods in merger and acquisition deals within the United Kingdom

Purpose This study aims to examine the effects of payment methods used in mergers and acquisitions (M&A) conducted by UK companies spanning the period from 2007 to 2019. Design/methodology/approach The study used the estimated expected returns method to identify abnormal returns during the deal announcement period, applying event study analysis with both univariate and multivariate regression models to detect cumulative abnormal returns around the announcement timeframe. Findings The results show a short-term positive return increase for acquiring firms, controlling for deal-specific characteristics like target firm location and payment methods. The authors observed a preference for cash financing across domestic and cross-border transactions. Multivariate analysis revealed insignificance between payment methods and deal characteristics like cross-border acquisitions and diversification. Research limitations/implications The study’s focus on publicly traded firms in the UK and the absence of a comparative analysis across different regions and markets limits the sample size and may impact the generalizability of findings. Practical implications The study proposes three practical implications. Firstly, firms should tailor payment methods to each transaction, aligning with strategic goals to optimize value and mitigate risks. Secondly, decision-makers must prioritize comprehensive due diligence and strategic alignment throughout M&A processes to enhance success and maximize synergies. Finally, analysing broader strategic contexts and regulatory landscapes when structuring transactions enables goal attainment, such as market expansion or value creation. Social implications The study’s findings can promote transparency and accountability among corporate decision-makers in M&A transactions. Stakeholders can advocate for transparent decision-making processes, enhancing trust in corporate governance. Originality/value This study provides valuable insights into the impact of payment methods on shareholder value in M&A transactions involving UK companies, informing strategic decision-making and contributing to the understanding of corporate finance dynamics.

Adaptive Scenario Planning Development for Indonesian Digital Health Industry: Case Study of Export Support Services (ESS) in Promoting UK Companies Entering Indonesia

The COVID-19 pandemic, once an unpredictable yet plausible future event, has proven to be a reality, highlighting the urgent need for adaptation. Factors such as varying Universal Health Coverage (UHC) maturity, limitations in healthcare infrastructure, and unpredictable private sector moves, including venture capital investments, add to the uncertainty. Like the COVID-19 pandemic, Brexit was another unpredictable yet plausible event that has become a reality. Export Support Service (ESS), a UK Department for Business and Trade (DBT) initiative, assists UK SMEs in expanding beyond the EU post-Brexit, including Indonesia’s digital health sector. The study refines its strategy to navigate the market’s complexities through adaptive scenario planning. This study identified 25 key factors shaping Indonesia’s digital health future and developed three scenarios: “Cherry Blossom Park,” “Volcano Eruptions Amidst a Forest,” and “High-Tech Greenhouse in a Desert.” Each scenario explores implications and opportunities, providing strategic guidance for ESS.

Integrating LSTM Networks with Mean-Variance Optimization for Enhanced Portfolio Construction: An Empirical Study on UK Stock Market

Portfolio optimization has long been a central theme in finance. With ongoing advancements in machine learning, there is a significant opportunity to integrate predictive methods into portfolio optimization. This paper proposes leveraging Long Short-Term Memory (LSTM) networks alongside the established Mean-Variance (MV) optimization framework to construct optimal portfolios. These portfolios aim to help financial investors effectively manage and mitigate risk while maximizing returns. The study meticulously screened the leading stocks of 12 prominent UK companies listed on the London Stock Exchange (LSE), known for their influence and visibility. Initially, the study applies the LSTM networks to predict stock price volatility and integrates these predictions into the MV model to allocate portfolio weights effectively. To underscore the superiority of the proposed approach, the study compares cumulative returns from portfolios optimized for maximum and minimum variance Sharpe ratios with real data against the FTSE100 index over the same period. The results demonstrate that the portfolio optimized with the maximum Sharpe ratio significantly outperforms both the conservative minimum variance portfolio and the FTSE100 index. This empirical evidence underscores the practical value of integrating advanced machine learning techniques with established financial theory, enabling more innovative and efficient investment strategies to meet the evolving needs of financial investors.

The link between sustainability initiatives at firm and supply chain levels: The mediating role of involvement of partners

AbstractThe deliberations of the COP28 in Dubai in December 2023 and the growing importance of UN Sustainable Development Goals have highlighted that sustainability initiatives have moved from being ‘nice‐to‐do’ to ‘must‐do’. The resource dependency theory suggests that a firm cannot develop green strategies in isolation, and a substantial involvement of all supply chain partners is needed for achieving larger impacts on environmental sustainability. However, the literature has yet to explore this link in detail. In this paper, we investigate the link between sustainability initiatives at a firm level and at the supply chain level in line with global green agenda. Data collected through a questionnaire survey of senior logistics and supply‐chain managers in UK companies were used to propose and statistically validate a framework combining both constructs and causal hypotheses. We further use a case of a farming company from Luxemburg to validate our research findings. Our results suggest a strong link in terms of green strategies between the firm level and supply chain level. We find that this link is mediated by the degree of involvement of supply chain partners. A case company participated in the study agreed to our research findings related to importance of technology and collaboration in food sector to share the resources among all supply chain players. We also find that green strategies result in improved business performance.

Examining the relationship between CEO power and modern slavery disclosures: The moderating role of board gender diversity in UK companies

AbstractDrawing on agency and gender socialisation theories, this study examines the effect of Chief Executive Officer (CEO) power on corporate modern slavery disclosures (MSD) and investigates whether board gender diversity might influence this relationship. Based on a sample comprising the Financial Times Stock Exchange (FTSE) 100 companies from 2016 to 2020, the findings indicate that, although there has been progress in corporate transparency concerning modern slavery, a significant gap persists in the reporting on the measurement and monitoring of the effectiveness of their policies. This may stem from powerful CEOs' desires to maintain a positive corporate image, leading to minimal disclosure of potentially damaging information. The fixed effects panel regression analysis reveals a negative relationship between CEO power (CEOP) and the extent of modern slavery disclosures (MSD), with a significant moderating effect observed when female board representation is substantial. This evidence suggests that female board members may challenge groupthink and introduce diverse perspectives that can alter the board's dynamics, potentially mitigating the negative impact of CEOP on issues like modern slavery disclosure by encouraging more ethical and collective decision‐making. This research underscores the need for greater transparency and accountability in addressing modern slavery and promoting more responsible business practices.

A complex network analysis approach to bankruptcy prediction using company relational information-based drivers

Corporate bankruptcy prediction is a long-standing topic of interest for a variety of stakeholders. Various prediction methodologies have been proposed to achieve more accurate predictions. So far, most studies have focused on making predictions using artificial intelligence models fed with accounting information only or a combination of accounting information and other category or categories of information. This study proposes new corporate governance drivers that exploit company relational information using board of directors’ networks of companies and the concept of node embeddings obtained by mapping large directors’ networks to lower-dimensional spaces. The contribution of these new drivers to the overall prediction performance is assessed using data on UK companies listed on the London Stock Exchange. The proposed two-stage methodology consists of devising new drivers in the first stage followed by risk class prediction in the second stage. We examine different complex network structures that capture the diversity of connectivity patterns observed in directors’ networks. Empirical results suggest that the proposed network-based drivers that use company relational corporate governance information significantly improve the performance of bankruptcy prediction.

Firms’ Capital Structure during Crises: Evidence from the United Kingdom

This study was conducted using the dynamic panel two-stage least squares system generalized methods of moments (2SLS-system GMM) to examine how UK companies made capital structure decisions during the COVID-19 pandemic. Contrary to expectations, firms opted to reduce their debt exposure during the pandemic. Tobin’s Q was the most significant determinant of capital structure, as it mitigated total debt by 0.25% during the pandemic. This result aligns with the pecking order theory, suggesting that firms prefer internal financing over debt. Simultaneously, combined scores (ESG) and the decomposed environment (E), social (S), and governance (G) scores individually and paired with the COVID-19 dummy negatively affected short-term debt by 0.012%, 0.015%, 0.0068%, and 0.00434%, respectively. This study’s results highlight the significance of firms adopting less debt-heavy policies during periods of heightened uncertainty to effectively manage financial risk. This result underscores the importance of prudent financial risk management strategies for navigating the challenges posed by sudden crises. Our findings suggest that a complex interplay of factors influences capital structure decisions during crises, with debt reduction and prudent risk management emerging as critical strategies.

Translating Financial Statements as a Means to Attract Foreign Investors

Commercial companies generally seek to maximise their market value. One of the means to achieve it is to attract foreign investors. Consequently, companies present information for investors not only in the language of the country of their registration, but also in other languages. They translate the information predominantly into English due to its status as a lingua franca. The aim of this study is to investigate the English translations of the consolidated financial statements of Polish listed companies and assess their textual fit to the consolidated financial statements prepared by the UK and US companies. The analysis covers the legal context of the preparation of consolidated financial statements and a corpus analysis of the language used in these documents. The results show that although there is a variation between particular translations, they are fit for the purpose of attracting foreign investors.

Analysis of the Board Oversight and Accountability Mechanism under UK Company Law

This paper focuses on the legal framework and the effectiveness of the board oversight and accountability mechanism within UK company law, highlighting its importance and challenges in ensuring sustainable corporate development and protecting investor interests. UK company law aims to protect stakeholders by regulating directors' behaviour, addressing issues such as conflicts of interest and inadequate information disclosure that hinder effective supervision. As remedies, this study suggests enhancing training for board members, improving information disclosure, and incorporating independent directors to mitigate conflicts of interest and increase oversight transparency and efficiency. Through case analysis, this paper further explicates the implementation outcomes and challenges faced, providing references for corporate governance improvement. Ultimately, the research underscores that refining the oversight and accountability mechanisms is crucial to elevate corporate governance standards, fostering long-term corporate prosperity.

‘Take Back Control’: The implications of Brexit uncertainty on investor perception of ESG reputational events

AbstractThis study examines the impact of Brexit on investor reactions to Environmental, Social and Governance (ESG) events in UK companies. Post‐Brexit, investors show reduced sensitivity to ESG incidents, suggesting relaxed corporate accountability for ESG disasters. We observe varied investor responses to different ESG events, with most having less financial influence after Brexit. This research informs regulators, stakeholders and policymakers in the post‐Brexit era, emphasising the need for strong ESG regulations and communication in influencing investor behaviour. It contributes to understanding the relationship between regulatory changes, corporate reputation and investor reactions post‐Brexit.

Benefit corporation certification and financial performance: Capital structure matters

AbstractWe are examining the impact of benefit corporation certification on the profitability of UK companies, taking into account their capital structure. We contribute to the literature that scrutinizes the financial ramifications of Benefit Corporation Certification. Analyzing UK Certified Benefit Corporations (CBCs) and their noncertified counterparts using a difference‐in‐differences analysis, we find that the performance of CBCs with a capital structure heavily weighted towards debt declines in comparison to non‐CBCs, using Return on Assets as a measure of financial performance. Conversely, the performance of CBCs with a capital structure primarily composed of equity is comparable to that of non‐CBCs.

The evolution of non-financial report quality and visual content: information asymmetry and strategic signalling: a cross-cultural perspective

AbstractThe increasing stakeholders’ scrutiny requires firms to communicate their non-financial performance to signal their commitment to sustainability. Building on the intention-based view and signalling, legitimacy and institutional theories, this study investigates whether corporate efforts to reduce information asymmetry and enhance their legitimacy led to higher quality and more transparent non-financial reporting practices. This study analyses reports from German, UK and Chinese companies over 14 years. It carries out quantitative and qualitative analysis of textual and visual content to evaluate disclosure density and accuracy of non-financial reports. The findings show limited progress in terms of the density and accuracy of the information disclosed by businesses since 2005. Also, they reveal cultural specificities in the reporting and approach to corporate social responsibility, along with a tendency to “create an appearance of legitimacy” by organisations. This study adds to the literature by studying the use of visual elements in non-financial reports. Moreover, it calls for strict policies and guidelines for the reporting of environmental and social issues by organisations. In particular, the inappropriate use of visual contents, the failure to provide quantitative information and managerial orientations show the need for completeness, transparency, and balance of information in reporting guidelines and regulations. The lack of authenticity and quality of the reports jeopardises the very purpose of non-financial reporting eroding trust in the system by all relevant social and economic stakeholders.

Changing Share Price After Announcement Of The Merger And Acquisitions By Acquiring Firms Is Significant Or Insignificant

This Paper scrutinizes a model of merger and acquisition declaration of different companies in United Kingdom (Home Takeover) region and also other countries (Cross-Border Takeover) during the time period of 01 January 2019 to 30 June 2022 and finally displays the consequence of 50 Home takeover companies (UK companies acquired UK companies) and 50 cross- border companies (UK companies take over foreign companies) to recognize the post effect of merger andacquisition declaration on the stock prices of the target and acquired firms. Event Study Methodology has been used for this study, like, Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) are used to analyze the different event windows about the stock prices of the target and acquired firms. A paired sample investigation has also been directed by associating the Pre- and Post- announcement returns on stock prices for the event window of ± 5 days of the target and acquired firms. In the event windows, the stock price of the target firm's all is not positive CAAR but pointedly dissimilar from zero. In the home takeover figures, all the AAR and CAAR are not significant and some negative returns after the post-declaration prove about the primary investor's overreaction and efficient market hypothesis (EMH). There is no presence of positive implication in the cross-border pre-event return but only a positive implication returns in the home takeover pre-event return that is also significant at the 10% level.

Determinants of UK companies’ dividend policy

This study examines the major factors influencing UK companies listed on the Financial Times Stock Exchange (FTSE) 100 stock market's dividend policy (as determined by the dividend payout ratio) over 32 years, from 1990 to 2022. The dividend premium and free cash flow components make up the catering dividend. The outcomes of a wide range of panel data analysis regressions, such as Generalized Method of Moments (GMM) and Two-Stage Least Squares (2SLS) regressions, clearly show that the catering dividend significantly impacts UK firms' dividend policy. On the other hand, the dividend policy benefits from the dividend premium, which increases it by 12% to 17% on average. Free cash flow, on the other hand, has a negligible negative impact on the dividend policy by just 5%. It is crucial to mention that this outcome varies depending on the models and regression techniques used. Furthermore, this study emphasizes how important it is for a firm's size and profitability to play a key role in determining how it will implement its dividend policy. Financial leverage also becomes important since a company's dividend payment ratio decreases when it relies more heavily on debt in its capital structure. By using GMM and 2SLS regressions, this study carefully tackles the endogeneity issue, and the results hold up even when the endogeneity effect is reduced. Ultimately, this study emphasizes how important dividend catering components are in guiding UK companies' dividend policies, arguing that CEOs and legislators should pay more attention to this.

Carbon reporting regulation: Real effects, external pressures, and internal policies

AbstractMandatory climate change reporting is suggested as a mechanism for mitigating firms' climate change impact and, in particular, their carbon emissions. Although extant literature provides evidence of a negative association between the introduction of carbon reporting regulation and firms' carbon emissions, the literature on real effects of climate change reporting regulation is still in its infancy and has yet to provide evidence of the channels through which reporting regulation affects firms' real climate change‐related activities. By adopting the theoretical framework of the targeted transparency action cycle, which describes the mechanism leading to the real effects of reporting regulation, we provide empirical evidence on how external pressures exerted on firms and internal policies adopted by them shape the effects of carbon reporting regulation on firms' actual carbon emissions. We take advantage of the 2013 amendments of the UK Companies Act 2006, which made the United Kingdom the first country in the world to require its listed firms to report carbon emissions in their annual reports, and we empirically show that, first, after the introduction of the new reporting regulation, firms exhibit significantly lower levels of carbon emissions; second, these effects are more prominent in firms under higher external pressure; and third, firms that engage with relevant climate change policies exhibit a much larger reduction of their carbon emissions after the regulation took effect.

Enlightened Shareholder Value Principle in the UK Companies Act 2006: What Lesson for a Legal Approach to CSR in Nigerian?

Enlightened Shareholder Value Principle in the UK Companies Act 2006: What Lesson for a Legal Approach to CSR in Nigerian?

Unmasking the oligarchs – Using open source data to detect sanctions violations

Russia’s invasion of Ukraine in February 2022 led Western governments to impose extensive sanctions on the Russian economy and the people who maintain the regime - the so-called oligarchs. The enforcement of these sanctions and the manoeuvres of these oligarchs to evade them have created new challenges for the authorities, industry and society at large. This study aims to unmask sanctioned oligarchs who are beneficial owners of companies in the UK. The approach is based on the assumption that the actions of oligarchs leave detectable traces in the UK company register. Inspired by simple tools developed by volunteers for citizens doing their own intelligence work, software has been developed to achieve three different research objectives: to develop indicators of sanctions evasion, to demonstrate that it is possible to do useful intelligence work using only the resources available to the average citizen, and to develop a software tool to identify officers in the UK company register who are suspected of being linked to sanctioned oligarchs. The findings underscore the importance of open source investigations, reflecting a burgeoning intelligence phenomenon introduced as ‘citizen intelligence’, which has the potential to enhance the protection of society by building a more democratic and diverse intelligence community. This study opens the door for further research into the actions and tactics of sanctioned individuals, providing insights to protect global financial integrity and security.

Reinforcing green business strategies with Industry 4.0 and governance towards sustainability: Natural‐resource‐based view and dynamic capability

AbstractThe study explores the influence of contextual factors surrounding production planning and green strategic investment decision‐making practices (GSIDMP) in UK companies. We utilize a mixed‐method approach as a research methodology to study the current trend of production planning and GSIDMP. This study's conceptual model is rooted conspicuously in the resource‐based theory (RBT), natural‐resource‐based view, and dynamic capabilities. We empirically examine the nexus among GSIDMP, technological innovation, dynamic capability, and companies' performance. Our study was based on a sample selected from UK‐listed companies, FTSE ALL‐Share Index for the period (2012–2021). Also, the study utilizes data from the UK Innovation Survey (2018–2020) and corporate disclosure through companies' annual reports as a complementary approach for data collection. Findings of this study explore the interdependencies among company dynamic capability, advanced technological innovation and governance mechanisms, and their mediation influence on the nexus between GSIDMP and companies' performance. This study sheds lights on current business innovation strategies. Findings reveal how current practices of production planning and GSIDM in large UK companies shaped by boardrooms absorptive and adaptive capabilities, knowledge‐generating and knowledge‐collaboration capabilities, technological adoption, and corporate governance mechanisms. This study offers insight regarding boardrooms proactive engagement in exploration and exploitation activities to strengthen ambidexterity through various innovation trajectories associated with green production and GSIDMP towards sustainability. We provide managerial implications for decision‐makers, regulators, investors, scholars, and other stakeholders.

An Empirical Investigation of Business Strategy Development, Supply Chain Management, Environmental Analysis and Financial Innovations of Logistic Companies in UK

An Empirical Investigation of Business Strategy Development, Supply Chain Management, Environmental Analysis and Financial Innovations of Logistic Companies in UK