Corporate Governance and Firms Financial Performance in the United Kingdom

Abstract: The objective of this study is to examine empirically the impact of good corporate governance on financial performance of United Kingdom non-financial listed firms. Agency theory and stewardship theory serve as the bases of a conceptual model. Five corporate governance mechanisms are examined on two financial performance indicators, return on assets (ROA) and Tobin's Q, employing cross-sectional regression methodology. The conclusion drawn from empirical test so performed on 252 firms listed on London Stock Exchange for the year 2014 indicates a positive or a negative relationship, but also sometimes no effect, of corporate governance mechanisms impact on financial performance. The implications are discussed. Thereby, so distinguishing effects due to causes, we present a proof that, when the right corporate governance mechanisms are chosen, the finances of a firm can be improved. The results of this research should have some implication on academia and policy makers thoughts.