The Relationships of Corporate Governance, Government Regulation and Performance of Small Manufacturing Business in Australia

Abstract

In Australia, small businesses are defined by ABS as entities “employing less than 20 employees” (ABS 2008). In 2006 2007, 99% of businesses were considered as small businesses. Even though referred to as the “engine room of the Australia economy”, the small businesses are “forgotten” by the policy decision makers (Clarke 2007). The Australian literature suggests that both the government regulation and corporate governance of Australian firms are asymptotically directed to, and best suit the needs of, the largest companies (those that are public, listed and well-resourced). This study, sponsored by an ARC Linkage project, is to identify the empirical evidence on the relationships of corporate governance, government regulation and performance of small businesses in Australia. An online survey is used to solicit small businesses owners’ perceptions. Semi-structured interviews with the industry associations and regulators are used to gain their in-depth insights on the status quo and the proposed small business de-regulation framework. This research adopted an institutional perspective, derived from Williamson’s Transaction Cost Economics. Econometric models are adopted to analyse the impacts of various factors on the small business performance. As a complement, latent variable modelling is also used. Based on the empirical findings, a responsive de-regulatory framework will be developed. Policy recommendations will also be proposed to relieve small business regulatory burdens and to facilitate good governance practice.