Effect of Corporate Governance on the Performance of Small and Medium Enterprise’s (SME’S) in Lusaka’s Hardware Industry
DOI:
https://doi.org/10.5281/zenodo.10783129Keywords:
corporate governance, performance, sme’s, hardware industryAbstract
In recent decades, corporate governance has become a central, interesting and controversial topic in most developing countries. Therefore, this study focused on establishing the effect of corporate governance on the performance of SME’s in the hardware industry in Lusaka. This study sort to achieve the following objectives: Establish the impact of board independence on the profitability of small and medium-sized companies, to evaluate the effects of separation of powers between the shareholders and management on business performance and develop a framework which could be used in enhancing sustainability of corporate governance in the operations of SME’S in the long-term. This research was both qualitative and quantitative in nature. A cross sectional study design was used. A sample of 80 respondents was used in which 80 questionnaires were developed and administered with a return rate of 93%. The study used purposive sampling. The study found that 87% of the firms did not have a board in existence and firms which had a board in existence disagreed to the assertion that there was efficient use of resources when a board was present. It was also disagreed that firms profit margins and earnings were better off when a board was present to oversee the operations of the firm. Regarding the effect of separation of powers between the shareholders and management on business performance. It was found that (64/75) firms had shareholders who were also managing the business; therefore, there wasn’t separation of powers between managers and shareholders. Regarding the effect of board independence and firm profitability, the results show that when the board was in office, the firm had a positive effect on stock returns. The results of this study show that (50/75) disagree and (10/75) strongly disagree. Lastly the last objective found that the corporate governance framework applied to any business has to be fit for purpose, which includes being appropriate for the size and maturity of the business .The study therefore concluded that a majority of SME’s have not embraced the idea of corporate governance. Many firm owners have preferred to be their own decision makers as regards to the operations of their business. There is less confidence in engaging external clients in the affairs of their businesses. Based on the findings and engagements with the responses, the researcher suggests conducting a study on enhancing corporate governance in SME’s.
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