The Theory of the Firm and Corporate Governance. In order to test the theory of the firm and alternative theories of firm behaviour, primary data was collected from 310 managers of UK-based firms. This primary data was then combined with secondary data collated from the FAME database and the FTSE ISS Corporate Governance Index. This data was then used to construct a number of binary probit models to test the validity of competing theories of the firm. This quantitative analysis is underpinned by an extensive review of the literature.