Corporate governance in small and medium enterprises: a review

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kuldeep Singh ◽  
Deepa Pillai
Keyword(s):  
Corporate Governance ◽  
Emerging Economies ◽  
Small And Medium Enterprises ◽  
Cost Effective ◽  
Governance Structure ◽  
Sustainable Growth ◽  
Great Level ◽  
Governance Mechanism ◽  
Content Type ◽  
Implementation Challenges

Purpose Research signifies that well-governed companies exhibit long-run financial results and sustainable growth. In the context of SMEs, this paper aims to review the literature on corporate governance, the implementation challenges of corporate governance and its relationship with performance. Entwined with Indian scenarios, the study can be generalized to other emerging economies, with geographic considerations. Design/methodology/approach Studies from 1990 to 2020 are included in the literature review. Three databases were used for the extraction of relevant research articles: Scopus, EBSCO and ScienceDirect. To identify the relevant work, keywords along with Boolean operators for literature search were used from the research databases. The selected articles were further refined based on the authors’ keywords, journal type, data analysis methodologies and abstract analysis. Finally, 115 articles were selected and categorized into themes based on inclusion criteria for further study. Findings Corporate governance provides tangible and intangible benefits to SMEs. The study emphasizes on designing a cost-effective discrete governance mechanism for SMEs than the prevailing corporate governance code for large firms. Furthermore, implementing the corporate governance structure with a great level of discipline and stability is equally essential and related to performance. Originality/value Listing of SMEs is a relatively new phenomenon in emerging economies, including India. With listing, corporate governance and financial performance are expected to shift. The inclusion of the changing landscape of SME governance makes this study unique and relevant in the current scenario. The study will benefit the policymakers and firms to adopt optimum governance practices and link it optimally with performance.

Corporate governance: a conscious approach for Asia and emerging economies

2016 ◽  
Vol 58 (3) ◽  
pp. 317-336 ◽  
Author(s):  
Mahmoud Rajablu
Keyword(s):  
Corporate Governance ◽  
Emerging Economies ◽  
Economic Transition ◽  
Small And Medium Enterprises ◽  
Content Type ◽  
Governance Models ◽  
Anglo American ◽  
Asian Economy ◽  
Corporate Governance Practice ◽  
Medium Enterprises

Purpose Asian economy in transition is facing great deal of challenges, so its corporate governance. This paper investigates the dominant corporate governance models practiced under the liberal market capitalism, cooperative capitalism, collective capitalism and the state capitalism across the continents and proposes conscious governance approach for Asia and emerging economies. Design/methodology/approach The paper explores and compares Anglo-American and Continental European corporate governance models. The report further investigates the development of corporate governance across Asian publicly listed companies, state-owned enterprises, small and medium enterprises and other privately held large enterprises, and raises questions and concerns and derives conclusion. Findings The Asian experience of imposing Western corporate governance models is more of a simplification of tasks based on political, cultural and globalization needs rather than the regions’ economic, financial and social development reality. Practical implications The unique proposition of conscious corporate governance aligns corporate governance practice with Asian socio-economic transition vision and helps with further development and reforms. Originality/value The paper adds to the existing efforts and triggers a fresh view to the Asian and emerging economies corporate governance research and strategy.

Competition, corporate governance and corporate performance

2015 ◽  
Vol 6 (3) ◽  
pp. 251-271
Author(s):  
Olufemi Bodunde Obembe ◽  
Rosemary Olufunmilayo Soetan
Keyword(s):  
Corporate Governance ◽  
Private Sector ◽  
Productivity Growth ◽  
Interaction Effect ◽  
Interactive Effect ◽  
Bank Loans ◽  
Sustainable Growth ◽  
Governance Mechanism ◽  
Content Type ◽  
Corporate Governance Mechanism

Purpose – The purpose of this paper is to examine the nature of interactive effect of competition and corporate governance on productivity growth of firms in Nigeria. Studies that have considered this issue were mainly from developed countries possessing strong institutions as against those of developing countries like Nigeria. Moreover, studies from Nigeria have focused exclusively on corporate governance and firm performance. The interaction effect of competition on corporate governance is yet to be addressed in the context of Nigeria. Design/methodology/approach – The study adopts the dynamic panel data analysis approach suggested by Arellano and Bond for productivity growth analysis. Data on 76 non-financial firms for 11 years beginning from 1997 were extracted from the financial statements of companies collected from the Nigerian Stock Exchange and subsequently analysed using General Methods of Moments (GMM). Findings – The results show that competition had a positive impact on productivity growth, however, its interaction effect with corporate governance had a substitute but not significant impact on productivity growth. When competition was interacted with an alternative corporate governance mechanism – bank – a positive and significant impact was, however, observed which shows that competition and bank loans are complementary in stimulating productivity growth of firms in Nigeria. Research limitations/implications – The study could not be carried out beyond year 2007 owing to the exit of some firms after 2007 which could have reduced the sample size drastically. The findings emanating from this study suggests that government should focus much more on implementing competitive policies and bother less on writing corporate governance codes. Practical implications – The results demonstrate that corporate governance had no significant impact on productivity growth even when it was interacted with competition. However, competition on its own had a significant impact on productivity which means that Nigeria should concentrate more on building a competitive private sector, and in this regard, government should try and pursue policies that will foster competition and eliminate monopolistic tendencies. Once, there is effective competition, the corporate governance may be strengthened. However, the interactive effect of competition and bank loans was found with a positive and significant impact which indicates that banks as alternate corporate governance mechanism can only be effective if competition is strong. This goes to show that the financial sector may not be able to effectively and positively impact the real sector in Nigeria if the prevailing level of competition is low. In such a situation finance may not be channelled to projects that have long-run implications on sustainable growth and development. Social implications – Socially, if the environment for competition is not fostered in Nigeria, the country may face an uphill task in combating the problem of poverty through a private sector-led solution. Hence, there is a need for government to begin to formulate comprehensive competition policies that will ensure that resources are optimally utilized in Nigeria. Originality/value – In the context of Nigeria, this study is novel, the use of productivity growth as against firm financial performance is unique for Nigeria while the use of GMM method of analysis helps in reducing the effect of endogeneity inherent in corporate governance and performance of firms in Nigeria.

scholarly journals The role of monitoring mechanisms towards company’s performance

2016 ◽  
Vol 6 (4) ◽  
pp. 408-428 ◽  
Author(s):  
Romlah Jaffar ◽  
Zaleha Abdul-Shukor
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Negative Relationship ◽  
Governance Structure ◽  
Board Members ◽  
Political Connection ◽  
Governance Mechanism ◽  
Content Type ◽  
Monitoring Mechanism

Purpose Past studies show that companies’ connection with the government (or politically connected companies (PCCs)) contributed negatively to their financial performance. The grabbing hand theory suggests that political connection demand companies to serve political and social obligation that exhaust companies’ financial resources. The purpose of this paper is to extend the previous studies by examining the role of monitoring mechanisms, specifically corporate governance mechanism and institutional ownership (IO), whether they weaken or strengthen the financial performance of PCCs in Malaysia. Design/methodology/approach The sample consists of all companies listed on the Main Board of Bursa Malaysia (previously known as Kuala Lumpur Stock Exchange) for the year of 2004-2007. The time periods were chosen because there were no significant economic and political events that could possibly distorted the financial and non-financial data. Findings The findings show that companies’ political connection (the presence of political figure or government representative as members of board of director) has consistently showing negative relationship with performance. The result is consistent with the grabbing hand theory that argues that companies’ connection with government would actually destroy companies’ value. The monitoring role of corporate governance as measured by the percentage of independent board members does not have any significant effect on firm’s performance. The monitoring role of corporate governance as measured by the composition of independent board members have shown a positive significant effect on the company’s performance. However the second monitoring mechanism, the percentage of institutional investors, have a tendency to weaken the company’s performance. Originality/value The findings of this study provide an additional understanding of the consequence of government intervention on companies’ performance. This study also highlights the role of monitoring mechanism (independence board members and IO) in strengthening or weakening the performance. The findings suggest that the proper appointment criteria for board members should be seriously considered to ensure better corporate governance structure. Therefore, the formation of the nomination committee as suggested by the current Malaysian Code of Corporate Governance play an important contribution to ensure candidates nominated as board members have proper credentials and qualifications to carry out responsibilities as board members.

Board Effectiveness: An Evaluation based on Corporate Governance Score

Think India ◽  
2015 ◽  
Vol 18 (1) ◽  
pp. 16-23
Author(s):  
Hitesh Shukla ◽  
Nailesh Limbasiya
Keyword(s):  
Corporate Governance ◽  
Good Governance ◽  
Sustainable Growth ◽  
Governance Mechanism ◽  
Minority Shareholders ◽  
Effective Governance ◽  
Performance Orientation ◽  
Corporate Governance Mechanism ◽  
And Performance ◽  
Ethical Governance

Growth, progress, and prosperity of any country depend highly on the corporate governance mechanism of that country. Good governance of a country helps it to sustainable growth and consistency in progress. The good governance should contribute towards the improvement in transparency, ethics, morality, and disclosure. The principles of good governance stand on honesty, trust, integrity, openness, and performance orientation. Our honorable Prime Minister Narendra bhai Modi had given the three E for good governance during his speech on Independence Day i.e. Effective Governance, Electronic Governance, and Ethical Governance. The fundamental concern of corporate governance mechanism is to ensure the protection of minority shareholders/owners of specific firms. Mechanism of a corporate governance specifies the relations among the shareholders, board of directors, and managers. The present paper is an attempt to evaluate the effectiveness of the board by calculating the corporate governance score. The mandatory and non-mandatory guidelines have been considered while assigning points to specific parameters of the corporate governance.

Does corporate governance affect the performance of Islamic banks? New insight into Islamic countries

2020 ◽  
Vol 20 (6) ◽  
pp. 1073-1090 ◽  
Author(s):  
Ejaz Aslam ◽  
Razali Haron
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Positive Impact ◽  
Islamic Banks ◽  
Governance Mechanism ◽  
Method Of Moment ◽  
Content Type ◽  
Return On Equity ◽  
Islamic Countries ◽  
And Performance

Purpose Corporate governance plays a significant role to overcome agency issues and develop the culture of transparency and openness. In this context, this paper aims to examine how corporate governance mechanisms affect the performance of Islamic banks (IBs). Design/methodology/approach Stepwise, two-step system generalize method of moment estimation technique is used in the analysis in which control variables are added into the model sequentially. This study used data on 129 IBs from 29 Islamic countries (Middle East, South Asia and Southeast Asia) during the period of 2008 to 2017. Findings The findings suggest that the audit committee (AUDC) and Shariah board (SB) have positive impact on the performance of IBs (return on assets and return on equity). However, board size and risk management committee have negative and significant effect on the performance of IBs. CEO duality and non-executive directors have mixed relationship with the performance of IBs. These results support the argument that IBs need to improve their financial performance through appropriate governance mechanism. Research limitations/implications The findings of the study added a new dimension to the governance research that could be a valuable source of knowledge for policymakers and regulators to improve the existing governance mechanism for better performance of IBs. Originality/value The study fills the gap in the literature by addressing the issue of corporate governance on performance of IBs across countries. Agency theory is discussed to explain the relationship between corporate governance mechanism and performance.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

Assessment of the significance of factors affecting the growth of women entrepreneurs: study based on experience categorization

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sucheta Agarwal ◽  
Veland Ramadani ◽  
Leo-Paul Dana ◽  
Vivek Agrawal ◽  
Jitendra Kumar Dixit
Keyword(s):  
Emerging Economies ◽  
Women Entrepreneurs ◽  
Uttar Pradesh ◽  
Sustainable Growth ◽  
Gender Orientation ◽  
Content Type ◽  
Factors Affecting ◽  
Emerging Nations ◽  
Practical Implications ◽  
Significant Factors

Purpose The ascent of women enterprising community (WEC) in a couple of decades draws the attention of various government and non-government bodies. Literature has mentioned various studies that focus on the factors affecting the success or failure of women entrepreneurs (WEs), but understanding of the ranking of the factors depending on the experiences of different WEs is needed. This study aims to identify the significant factors essential for the growth of WEC. Design/methodology/approach This study examines the factors through interview of 33 WEs having different entrepreneurial experiences (less than 1 year, more than 1 year but less than 10 years and more than 10 years of experiences) from different regions of Uttar Pradesh, India, and with the help of analytical hierarchical process, ranks the factors affecting the sustainable growth of WEs. Findings Through analysis, significant factors have been identified such as determination, education, entrepreneurial resilience, personal satisfaction and provide employment, and these factors have been analysed according to the different experiences of WEs. An investigation of ranking these factors of WEC, especially in the emerging nations, can assist policymakers in designing projects that improve the mindfulness associated with women enterprise and define the compelling methodologies. Practical implications The growth of the WEC is significantly affected by gender orientation ways of thinking as driven by entrepreneurship models. Originality/value This study gives a direction to policymakers by emphasizing on significant factors of various stages of enterprise development for the encouragement of WEs in the emerging economies.

Corporate governance failure at Ricoh India: rebuilding lost trust

2018 ◽  
Vol 8 (4) ◽  
pp. 1-20
Author(s):  
Sonu Goyal ◽  
Sanjay Dhamija
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Multinational Corporations ◽  
Audit Committee ◽  
Governance Structure ◽  
Special Focus ◽  
Corporate Governance Structure ◽  
Content Type ◽  
External Auditors ◽  
The Board Of Directors

Subject area The case “Corporate Governance Failure at Ricoh India: Rebuilding Lost Trust” discusses the series of events post disclosure of falsification of the accounts and violation of accounting principles, leading to a loss of INR 11.23bn for the company, eroding over 75 per cent of its market cap (Financial Express, 2016). The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. The case highlights the responsibility of the board of directors, audit committee and external auditors and discusses the changes required in the corporate governance structure necessary to ensure that such incidents do not take place. The case also delves into the classic dilemma of degree of control that needs to be exercised by the parent over its subsidiaries and freedom of independence given to the subsidiary board, which is a constant challenge all multinationals face. Such a dilemma often leads to the challenge of creating appropriate corporate governance structures for numerous subsidiaries. Study level/applicability The case is intended for MBA courses on corporate governance, business ethics and also for the strategic management courses in the context of multinational corporations. The case can be used to develop an understanding of the essential of corporate governance with special focus on the role of the board of directors, audit committee and external auditors. The case highlights the consequences and cost of poor corporate governance. The case can also be used for highlighting governance challenges in the parent subsidiary relationship for multinational corporations. The case can be used for executive training purposes on corporate governance and leadership with special focus on business ethics. Case overview This case presents the challenges faced by the newly appointed Chairman Noboru Akahane of Ricoh India. In July 2016, Ricoh India, the Indian arm of Japanese firm Ricoh, admitted that the company’s accounts had been falsified and accounting principles violated, leading to a loss of INR 11.23 bn for the financial year 2016. The minority shareholders were agitating against the board of directors of Ricoh India and were also holding the parent company responsible for not safeguarding their interest. Over a period of 18 months, Ricoh India had been in the eye of a storm that involved delayed reporting of financials, auditor red flags regarding accounting irregularities, a forensic audit, suspension of top officials and a police complaint lodged by Ricoh India against its own officials. Akahane needed to ensure continuity of Ricoh India’s business and also act quickly and decisively to manage the crisis and ensure that these incidents did not recur in the future. Expected learning outcomes The case provides an opportunity for students to understand the key components of corporate governance structure and consequences of poor corporate governance. More specifically, the case addresses the following objectives: provide an overview of corporate governance structure; highlight the role of board of directors, audit committee and external auditors; appreciate the rationale behind mandatory auditor rotation; appreciate the consequences of poor corporate structure; explore the interrelationship between sustainability reporting and transparency in financial disclosures of a corporation; understand management and governance of subsidiaries by multinational companies; and understand the response to a crisis situation. Supplementary materials Teaching notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS 11: Strategy.

Corporate governance and risk in cross-listed and Canadian only companies

2019 ◽  
Vol 57 (10) ◽  
pp. 2740-2757 ◽  
Author(s):  
Atreya Chakraborty ◽  
Lucia Gao ◽  
Shahbaz Sheikh
Keyword(s):  
Corporate Governance ◽  
Differential Effect ◽  
Composite Index ◽  
Governance Mechanism ◽  
Firm Risk ◽  
Governance Mechanisms ◽  
Content Type ◽  
Listed Firms ◽  
Corporate Governance Mechanisms ◽  
The Impact

Purpose The purpose of this paper is to investigate if there is a differential effect of corporate governance mechanisms on firm risk in Canadian companies cross-listed on US markets and Canadian companies not cross-listed (Canadian only companies). Design/methodology/approach Using a sample comprised of all Canadian companies included in the S&P/TSX Composite Index for the period 2009–2014, this study applies OLS and fixed effect regressions to investigate the effect of corporate governance mechanisms on firm risk. Interaction variables between governance mechanisms and the cross-listing status are used to examine if this effect is different for cross-listed firms. Findings Results indicate that the effect of board characteristics such as size, independence and proportion of female directors remains the same in both cross-listed and not cross-listed firms. CEO duality and insider equity ownership impact firm risk only in cross-listed companies, while institutional shareholdings, environmental, social and governance disclosure and family control affect firm risk in Canadian only firms. Overall, the empirical results indicate that some governance mechanisms impact firm risk only in firms that cross-list, while others are well-suited for Canadian only firms. Practical implications This study suggests that some of the differences between Canadian companies that cross-list and the Canadian companies that do not cross-list in US stock markets may change the impact of governance mechanisms on firm risk. Therefore, these findings have important implications for the design of governance mechanisms in Canadian firms. Since some of these differences are common to other economies, the conclusions can be extended to companies in other countries with similar governance structures. Originality/value Although previous studies have investigated the effect of governance mechanism on firm risk, this is the first paper that studies the differential effect for companies that cross-list in US markets. Specifically, differences in the ownership structure, firm control and in the regulatory and institutional environment, may explain this differential effect. Unlike most of the previous studies that focus on the effect of individual governance mechanisms, this study uses several mechanisms and their interactions at the same time.

The role of national culture in the impact of board gender diversity on firm performance: evidence from a multi-country study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Navaz Naghavi ◽  
Saeed Pahlevan Sharif ◽  
Hafezali Bin Iqbal Hussain
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Governance Structure ◽  
Corporate Governance Structure ◽  
Data Set ◽  
Content Type ◽  
Board Gender Diversity ◽  
The Impact

PurposeThis study seeks to add more insights to the debate on “whether”, “how”, and “under which condition” women representation on the board contributes to firm performance. More specifically, the current study aims to investigate if the effect of board gender diversity on firm performance is dependent on macro factors of national cultures.Design/methodology/approachThe authors used the generalized method of moments regression and a data set consists of 2,550 company year observations over 10 years.FindingsThe results indicated that cultural variables interact with board diversity to influence firm performance. Having women on the board in countries with high power distance, individualist, masculine and low-uncertainty avoidance culture influences the firm performance negatively.Originality/valueThe findings indicate that the effects of corporate governance structure on firm performance depends on culture-specific factors, providing support for the argument that institutional norms that are governed by cultural norms affect the effectiveness of corporate governance structure.

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