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Board structure as a defense mechanism during periods of economic downturn, evidence from the 2007-2008 financial crisis in the UK.

Stegehuis, X. (2015) Board structure as a defense mechanism during periods of economic downturn, evidence from the 2007-2008 financial crisis in the UK.

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Abstract:This paper contributes to the existing corporate governance literature in the United Kingdom. In the 2007-2008 financial crisis, many firms faced adverse firm performance or went bankrupt. This paper tried to reveal a possible ability of board structure to shield against adverse firm performance during periods of economic downturn in the UK. A multiple hierarchal regression method was used to come up with the results, these were controlled with a sensitivity analysis. The random sample in this paper existed of 466 industrial firms listed on the London Stock exchange. The results did not reveal clear or obvious relations between board structure and firm performance during the 2007-2008 crisis. However, evidence was presented for a weak positive relation between board size and firm performance, this connection was confirmed in the sensitivity analysis. This might be confirmation of the claim of Essen et al (2013) that board discretion is desired in periods of economic downturn. Therefore this work can serve as a source of inspiration for future research into the relation between governance mechanisms and firm performance during periods of economic downturn in Anglo-Saxon markets. Connections in those markets appear to be different compared to periods of economic stability.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:70 social sciences in general, 85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/67292
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