Revision of corporate governance codes in the UK: implications for firm value and earnings management

Purpose The purpose of this paper is to explore the effect of the revised UK Corporate Governance (CG) Code on firm profitability, earnings management and operating expenses. The three additional recommendations – gender diversity, cultural diversity and auditor tenure – found in the revised UK CG Code are examined in the context of these variables. Design/methodology/approach In the setting of the FTSE 100 UK-listed firms for the period 2003–2022, giving 1,900 firm-year observations, this study conducts content analysis and panel data empirical estimation to test the hypotheses. Findings The results indicate a significant positive effect of the revised UK CG Code on firm profitability and a significant negative effect on earnings management and operating expenses. The introduction of cultural and gender diversity as well as auditor tenure has significantly improved firm profitability indicators while reducing operating expenses. Social implications It appears that this revision of CG Codes by the UK, the first country in implementing and a pioneer in revising CG Codes, paved the way for other firms to follow in a global context. The findings are important for regulators, policymakers, practitioners, investors and the management of firms to promote transparency and accountability. Originality/value This study not only examines the effect of the revised UK CG Code on firm profitability, earnings management and operating expenses but also observes the effect of the individual additional recommendations – gender diversity, cultural diversity and auditor tenure – found in the revised CG Code on these variables.