Although U.K. Code regards separation of the role of CEO and chairman as a sign of good governance, previous empirical analyses do not support it. For example, Coles et al. (2001), Weir et al. (2002), and Weir and Laing (2000) do not find any significant relationship between CEO duality and performance. Brickley et al. (1997) observe that costs of separation are larger than benefits for most large U.S. firms.
(3) Board Ownership
The findings of the primarily U.S. based literature suggest that management is aligned at low or possibly high levels of ownership but is entrenched at intermediate ownership levels (e.g., Morck et al., 1988; McConnell and Servaes, 1990). U.K. evidence confirms that U.K. management becomes entrenched at higher levels of ownership than their U.S. counterparts (e.g. Faccio et al., 1999; Short and Keasey, 1999). Hutchinson and Gul (2003) report that management share ownership and managers’ remuneration weaken the negative relationship between the firm’s investment opportunities and firm’s performance. In contrast, Coles et al. (2001) do not find any contribution to performance by managerial ownership.
(4) Institutional Holdings
As the U.K. Code encourages institutions to take an active role in governance, we may expect a positive relationship between institutional holdings and firm performance. Unfortunately, empirical evidence is not supportive of this recommendation. Both Faccio and Lasfer (1999, 2000) fail to find such a significant relationship for U.K. firms. Besides, de Jong et al. (2002) find that major outside and industrial shareholders negatively influence the firm value.
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