Does Compliance with the UK Stewardship Code by Institutional Investors Enhance Investee Earnings Quality

Abstract

This thesis examines whether compliance with the UK Stewardship Code (the Code) by institutional investors influences their investee companies’ earnings quality. The Code sets out the principles of effective stewardship for UK institutional investors, and aims to encourage them to better exercise governance responsibilities toward investee companies. This thesis tests whether Code compliance strengthens the relation between investment duration and size and earnings quality. The findings show no significant evidence indicating that Code compliance enhances investee companies’ earnings quality. The study also presents content analysis of compliance disclosure and an index is developed of Code compliance quality. Subsequent analysis allowing for variation in Code compliance quality still fails to indicate any significant relation with reported earnings quality. This study is one of the first attempts to test the effectiveness of the UK Stewardship Code. It provides valuable insights regarding the policy approach that underpins the Code as a method of improving corporate governance and provides a reference for further revision and development of the Code by policymakers.

Date of Award	10 Aug 2016
Original language	English
Supervisor	James Routledge (Supervisor), Jacqueline Christensen (Supervisor) & Jan Hollindale (Supervisor)