Impact of Corporate Governance on Financial Performance of the Publicly Traded Companies in UK

This study aimed to analyze the relationship between corporate governance and financial performance of listed companies on London Stock Exchange (LSE). FTSE 100 firms were selected as a sample for this study. The methodology of this research is the cross-sectional regression analysis where relevant data of 100 listed companies are used, for year 2021, to test our hypothesis. Data was collected from firm’s financial statements and the Bloomberg Terminal. The study employed 3 dependent variables representing financial performance, 4 independent variables representing corporate governance, and one control variable. The dependent variables for capturing financial performance were Return on Assets (ROA), Return on Equity (ROE), and Tobin Q ratio. The independent variables to represent corporate governance were board members, number of independent directors on board, single block holder (1 person holding more than 5% of total outstanding shares), and group block holders (3 person holding more than 15% of total outstanding shares). Lastly, one control variable i.e. Total Assets was used for this research. In conclusion, this study found that corporate governance is one of the factors that explains ~10% of the variance in financial performance, and remaining variance could be attributed to the variables that did not fall under the scope of this research.