Abstract
Orientation: Corporate governance adoption and compliance are an issue augmenting in importance recently and have been extended to business enterprises of any size including small and medium enterprises (SMEs).Research purpose: This study seeks to examine the impact of corporate governance adoption on the firm competitiveness and performance of SMEs in Vanderbijlpark.Research design, approach and method: The study employs a cross-sectional research design, which employed quantitative methods. One hundred fifty-two SME owners or managers were selected from Vanderbijlpark in Gauteng, South Africa. The collected data were analysed using a structural equation modelling system by using Smart PLS software.Main findings: The principal findings of this study revealed that the implementation of corporate governance by SMEs significantly and positively affected their competitiveness and performance.Practical and managerial implications: The paper provided practical implications and made some recommendations.Contribution or value-added: This article bridges the gap between theory and practice because it has both an economic and commercial impact in practice. It can be used in influencing public policy, teaching and research (because it contributes to the body of knowledge, particularly regarding SME corporate governance in emerging markets). An important aspect of this article is that it gives a framework for additional similar studies in other locations within emerging markets to test the generalisability of the findings. For teaching purposes, it provides a template for how to assess the link that exists between corporate governance and SME performance. Lastly, the article gives a unique empirical analysis of the relationship that exists between corporate governance compliance and performance of firms in South Africa, and thereby giving a valid contribution to corporate governance literature.
Highlights
Corporate governance has often remained erroneously linked with the red tape barriers and agency problems that are left to large firms (Bates 2013)
In view of the ResourceBased View that explains the corporate governance as a distinct capability of a firm, as well as the aforementioned empirical evidence, this article hypothesises that the adoption and compliance with the King Report III corporate governance principles applicable to SMEs positively influences firm performance of SMEs in Vanderbijlpark, Gauteng Province, South Africa
The SME owners or managers whose businesses are located in Vanderbijlpark, who have been in operation for at least 2 years, and comply with the description of an SME provided by the National Small Business Act of 1996 were the respondents in this study
Summary
Corporate governance has often remained erroneously linked with the red tape barriers and agency problems that are left to large firms (Bates 2013). The Global Entrepreneurship Monitor (GEM) (2015/16) reports that South African SMEs, which currently account for 98% of the firms in the country and in 2014 contributed about 45% towards the country’s GDP, were counted among those SMEs with the highest proportions of exits (precisely, over one quarter) globally, as a result of lack of finance This raises the question of whether these SMEs do conform to the principles and practices of good corporate governance.
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