Ecas, VN Valery C.

July 2, 2020

Governance, Business Ethics, Risk Management and Internal Control (GBRI)

1:00-3:00 PM (Monday-Friday)

Corporate Governance and the Small and Medium Enterprises Sector: Theory

and Implications

(JOURNAL ANALYSIS)

The article “Corporate Governance and the Small and Medium

Enterprises Sector: Theory and Implications” by Joshua Abor and Charles

K.D. seeks “to identify the extent to which the corporate governance

framework can be applied to small and medium enterprises (SMEs), and

discuss these issues further within the Ghanaian context” (p. 111).

According to Quartey (2015), SMEs in Ghana have been noted to provide

about 85% of manufacturing employment of Ghana. Hence, it implies that

there are a huge number of SMEs in Ghana. Thus, the purpose of the study

shows broader scope since a large number of SMEs are being studied.

Corporate governance has dominated policy agenda in developed market

economies for more than a decade and it is gradually warming its way to

the top of the policy agenda on the African continent. It is believed

that, good governance generates investor goodwill and confidence. The

issue of what constitutes a small or medium enterprise is a major concern

in the SME Literature. Different authors, in most cases have given

different definitions to this sort of business. SMEs have indeed not been

spared with the definitions problem that is usually associated with

concepts and with many components.

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 The outcomes of the study clearly says that “corporate governance

brings new strategic outlook through external independent directors and

enhances firm’s corporate entrepreneurship and competitiveness. Again the

problem of credit constraint and managerial incompetence in the Ghanaian

SME sector could also be overcome with a good corporate governance

structure in place” (Page 111). Hence, it is important to have explicit

obligations by firms on value creation. Good governance mechanisms among

SMEs are likely to result in boards exerting much needed pressure for

improved performance by ensuring that the interests of the firms are

served. In the case of and SME, board members bring into the firm

expertise and knowledge on financing options available and strategies to

source such finances thus dealing with the credit constraint problem of

SMEs as well.

The measurements used in the methodology is considering the key

issues of corporate governance in SMEs. The issue of corporate governance

has been a growing area of management research especially among large and

listed firms. The limited studies in the area with respect to SMEs have

focused mainly on developed economies (see Eisenberg et al., 1998; Bennett

and Robson, 2004). It is crucial to examine corporate governance in the

SME sector from the context of a developing economy. The research

limitations and implications mainly discuss and focuses on corporate

governance within the context of Ghanaian SMEs. This indicates that the

scope of the study is in Ghana which there might be a lot of places which

will show significant concern regarding the topic.

The results are reliable because the researcher identify the issues

in Ghana and collect data from it. Through investigation and proper

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collection of data the researcher gather the relevant information that can

help the research. Further information, the researcher did not suggest any

problem that could lead to unreliable results.

Based on the findings, “the corporate governance brings new strategic

outlook through external independent directors and enhances firms’

corporate entrepreneurship and competitiveness. Again the problems of

credit constraint and managerial incompetence in the Ghanaian SME sector

could also be overcome with a good corporate governance structure in

place” (p. 111) it is concluded that “In Ghana corporate governance can

greatly assist the SME sector by infusing better management practices,

stronger internal auditing and greater opportunities for growth. Hence,

corporate governance brings new strategic outlook through external

independent directors; it enhances firms’ corporate entrepreneurship and

competitiveness” (p119). The conclusion of the study clearly suggest a

huge implication on the overall study. Moreover, the conclusion therefore

can be believed in the sense that the author clearly provides problems to

be solved and the conclusion provided a solution.

The work contributed mainly first to the Ghana community by opening a

passage of proper governance mechanism. The work does not only showed

significant in Ghana but also to the whole businesses establishment

including the SMEs. The article is a strong scientific article by first

explaining the problem and effectively find solution to such. Overall, it

is quite a brilliant and well-written article with a big purpose of

redirecting the minds of business firms to the SMEs problems regarding

good governance system. This paper would benefit the state and beyond.

REFERENCES
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Quartey, Peter. (2015). Issues in SME Development in Ghana and South

Africa. International Research Journal of Finance and Economics. Retrieved

from:https://www.researchgate.net/publication/270758190_Issues_in_SME_Deve

lopment_in_Ghana_and_South_Africa. Retrieved on July 26, 2020.

Abor, Joshua & Adjasi, Charles. (2007). Corporate Governance and the Small

and Medium Enterprises Sector: Theory and Implications. Corporate

Governance.