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The Link Between Small Business Governance and Performance: The Case of the Ghanaian SME Sector

The Link Between Small Business Governance and Performance: The Case of the Ghanaian SME Sector The present study set out to examine corporate governance practices of SMEs in Ghana and whether there is any linkage between these governance practices and financial performance. We employed two levels of interaction to achieve our objectives: The first is an interview for a general understanding of governance issues in the SME sector and the subsequent design of a questionnaire for an exploration of the linkages between governance issues and firm financial performance by employing a linear model. The study reveals that governance structures in SMEs are jointly influenced by credit providers and business ethical considerations. The regression results show that board size, size of audit committees, corporate ethics and the proportion of outsiders on the audit committees have negative impact on financial performance while independence of the board and the presence of audit committees enhance firms' financial performance. The findings have some policy implications in that it shows that exporting SMEs are relatively profitable. It is recommended that in an attempt to promote exports, the legal and regulatory environment should be conducive for these firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal Of African Business Taylor & Francis

The Link Between Small Business Governance and Performance: The Case of the Ghanaian SME Sector

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The Link Between Small Business Governance and Performance: The Case of the Ghanaian SME Sector

Abstract

The present study set out to examine corporate governance practices of SMEs in Ghana and whether there is any linkage between these governance practices and financial performance. We employed two levels of interaction to achieve our objectives: The first is an interview for a general understanding of governance issues in the SME sector and the subsequent design of a questionnaire for an exploration of the linkages between governance issues and firm financial performance by employing a linear...
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Publisher
Taylor & Francis
Copyright
Copyright The Haworth Press
ISSN
1522-9076
eISSN
1522-8916
DOI
10.1080/15228910802052880
Publisher site
See Article on Publisher Site

Abstract

The present study set out to examine corporate governance practices of SMEs in Ghana and whether there is any linkage between these governance practices and financial performance. We employed two levels of interaction to achieve our objectives: The first is an interview for a general understanding of governance issues in the SME sector and the subsequent design of a questionnaire for an exploration of the linkages between governance issues and firm financial performance by employing a linear model. The study reveals that governance structures in SMEs are jointly influenced by credit providers and business ethical considerations. The regression results show that board size, size of audit committees, corporate ethics and the proportion of outsiders on the audit committees have negative impact on financial performance while independence of the board and the presence of audit committees enhance firms' financial performance. The findings have some policy implications in that it shows that exporting SMEs are relatively profitable. It is recommended that in an attempt to promote exports, the legal and regulatory environment should be conducive for these firms.

Journal

Journal Of African Business – Taylor & Francis

Published: Jun 6, 2008

Keywords: Export sector; financial performance; JEL Classification: G34; C23; Governance practices; SMEs

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