EFFECTS OF CORPORATE GOVERNANCE MECHANISMS ON THE PERFORMANCE OF PUBLICLY TRADED SMES IN DEVELOPING ECONOMIES

Corporate governance mechanisms are of particularly interest to publicly listed SMEs, as ineffective governance mechanisms, or the nonexistence of effective ones, can lead to the speedy and sure demise of these enterprises, as they generally do not possess the resources to survive as their larger counterparts. This paper examines the role of various governance mechanisms on the performance or market valuation of publicly traded SMEs, using Tobin’s Q, as a measure of market valuation. In an effort to stimulate theory building and empirical research in the realm of small firms, the paper proposes a number of propositions regarding the relationship between the governance mechanisms of management share ownership, board composition, institutional investor shareholding, and top management team size, on the one hand; and the performance of publicly listed SMEs, on the other. It makes an important contribution to the literature, as no prior governance studies have been found that examine the governance–performance relationships in publicly listed SMEs in small, open, developing economies, such as Jamaica. The paper concludes by offering important insights and recommendations for further SME-related governance research, such as how structural equation modelling may be applied to this research stream