Influence of corporate governance on SMEs in Malaysia

Small and Medium Enterprises (SMEs) are essential to Malaysia's economic growth and employment. Malaysian SMEs exhibit diverse specialties and adaptable structures to satisfy market demands. Assisting SMEs ensures their continued contribution to the economy. The establishment of governance is important in aiding SMEs to operate. Good governance serves to prevent the misuse of authority and establishes rules for effective business management. There is a significant study on how corporate governance impacts SMEs performance. Extensive research on corporate governance has been conducted in larger or publicly listed companies. However, studies focusing on corporate governance related to SMEs are noticeably scarce. Furthermore, Malaysia is among the countries that do not enforce corporate governance for SMEs. Thus, this study aims to examine the importance and implications of corporate governance on SMEs in Malaysia. There are three objectives in this study. The first objective is to investigate the factors influencing the implementation of corporate governance SMEs in Malaysia. A theory such as the Theory of Planned Behavior is employed as the main framework for the acceptance factors of corporate governance in SMEs. This objective used the quantitative method by collecting 380 questionnaires from SMEs in Malaysia. Data analysis is conducted via the Partial Least Square Structural Equation Modeling (PLS-SEM). The study found that attitude and perceived behavioral control influence the intention to implement corporate governance. The second objective is to assess the corporate governance code implemented for SMEs in other countries. There are 27 countries that implement SMEs corporate governance practices, providing a flexible and dynamic framework. The content analysis of 27 corporate governance practices discovered that the Malaysian Code of Corporate Governance does not incorporate three codes: Rights/Role of Shareholders, Shareholder Agreements, and Family Governance. These codes are suggested for enhancing corporate governance, specifically for SMEs in Malaysia. The third objective of the study is to simulate the corporate governance code on SMEs’ performance in Malaysia. Regression analysis aids in identifying the code that correlates with an increase in SMEs' performance. The findings indicate that Board Size, Board Composition, Family Governance, Firm Age, and Firm Size impact SMEs' performance. The implementation of these codes provides SMEs with access to an extensive array of benefits, advantages, and experiences. It results in improved efficiency and a greater ability to seize opportunities, ultimately contributing to the growth and sustainability of SMEs. Overall, the impetus of this study is to examine the implication of corporate governance on SMEs in Malaysia. Considering that corporate governance is not obligatory for SMEs, it is anticipated that the findings of this study will facilitate SMEs in adopting corporate governance standards. The study also proposes the introduction of a corporate governance code specifically designed for SMEs. Hence, implementing corporate governance in SMEs is expected to enhance their industry performance and contribute to Malaysia's economy.

Text 125193 - Full Text.pdf Download (5MB) Text SPE 2023 16 - Declaration Form.pdf Restricted to Repository staff only Download (1MB) Text SPE 2023 16 - Full Text.pdf Restricted to Repository staff only Download (5MB) Official URL or Download Paper: http://ethesis.upm.edu.my/id/eprint/18827

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