Firm Performance: NEDs and Institutional Shareholders

Corporate governance is a concept about the way in which board oversees the running of the company by its managers and how board members are in turn accountable to shareholders and the company. After the financial crisis of 2007 the corporate world has become more active in preventing shareholders' interests. Several recommendations and suggestions have been made by different codes and bodies to influence the activities of both Non-Executive Directors (NEDs) and institutional shareholders to increase firm performance. The empirical evidence regarding this issue indicates a mixed result and there is still intense debate over the contribution of NEDs and institutional shareholders. That's why, I analyzed the relationship between firm performance and NEDs & Institutional Shareholders in UK. Both the results indicate that NED’s presence is related with firm performance and the presence of institutional shareholders are not related with firm performance. The result also suggests that NEDs are effective monitors on behalf of the shareholders but not institutional shareholders.