Influence of size of SME's on corporate governance practice
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Muriira, Lennox Mugambi
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Abstract
The purpose of this research was to identify the influence of size of SME's on corporate governance practice. The research was of an exploratory nature and went on to answer questions regarding whether there was a relationship between the size of SME's and good corporate governance practice and the extent to which the size of SME's influenced good corporate governance practice. Data collection was done using questionnaires that had 18 questions including 6 questions that required scoring based on a 5 point Likert scale. Questions on the Likert scale were based on six measures of corporate governance namely independent directors; independence of committees; board size; split chairman/CEO role; board meetings and competence of audit committee members and audit committee meetings according to Khanchel (2007). The size of SME's was measured using number of employees and company's turnover. The population of interest was the top 100 SME's as per the Kenya top 100 mid-sized company survey conducted by Business Daily and KPMG between 2008 and 2010. The population was segregated into four strata's based on the industries the companies were operating in and a simple random sample drawn from each stratum. Data was analysed using Microsoft Excel and processed using SPSS to come up with twelve regression models. When size was measured in terms of company's turnover, it was discovered that independence of committees was significantly negatively impacted at 95% confidence level; when size was measured in terms of number of employees, it was discovered that independence of directors and board size were significantly positively impacted at 10% significance level while split of chairman/CEO role was significantly positively impacted at 5% confidence level. There was no statistical significance impact of size on board meetings and competence of audit committee members and audit committee meetings. The practical implication of this research includes the use of the findings by SME owners in making decisions regarding the corporate governance practices to put in place to improve performance in their organizations and by the government on the corporate governance practices they can encourage SME's to have in order to stimulate growth in furtherance of their agenda in developing SME's and the economy at large.