Corporate governance practices of small and medium enterprises (SMEs): An exploratory study in Ghana : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

Small and Medium Enterprises (SMEs) consist of 92% of registered businesses in Ghana. Prior studies like Abor & Quartey (2010) and Aryeetey & McKay (2007) have found that SMEs are the key contributors to Ghana’s Gross Domestic Product (GDP) and job creation, yet they hold the unenviable statistics of high rate of collapse due to weaker operating structures (Quartey, 2003). In order to understand the rate of collapse and weak structures of SMEs, this research explores Corporate Governance (CG) in SMEs in Ghana. Given that most CG studies focus on developed countries; CG has not been adequately documented or understood in developing and under-developed countries. This research examines CG practices in SMEs in Ghana using a multi-method approach. The research methodology is divided into two linked phases (that is, Phase 1 and Phase 2). Phase 1 uses a qualitative approach of face-to-face interviews with ten purposively sampled interviewees. The themes that emerged from Phase 1 together with those identified in the prior literature, were used to develop a survey for Phase 2, which had a sample size of 268 businesses. The research found that although Ghanaian SMEs are aware of CG practices, SMEs differ widely in the implementation of them. The difference in CG practices were found to be associated with type of business, shareholding structure, and level of knowledge. Firstly, the evidence provided by Phases 1 and 2 revealed that there are 11 sources of information for SMEs in Ghana. Of these, media is the most popular source of information. Secondly, the research found that there are eight reasons that affect CG practices in SMEs in Ghana, with finance being the most important reason. Thirdly, the research found that SMEs in Ghana face similar challenges in the implementation of CG to their counterparts in other developing countries. Lastly, the research recommends that punitive measures, education, training, enforcement of laws, the strengthening of key institutions and financial assistance are needed to improve CG practices in Ghana. The research expands CG knowledge in two significant ways. Firstly, it enriches the body of literature of studies on Ghana, a developing country that is often neglected by researchers due to the unavailability of data. Secondly, this research focusses on SMEs, which are overlooked in research in favour of publicly-listed businesses where data is widely and easily available from plentiful of database providers. This research is the first to identify current CG practices, reasons, and challenges of CG adoption among Ghanaian SMEs. Furthermore, the research extends the reasons for the adoption of CG in SMEs to include corporate social responsibility (CSR), investor confidence, competitors, and shareholder rights and ownership concentration. The recommendations will be of particular interest to Ghanaian authorities for devising or amending the rules and regulations pertaining to CG matters. This research hopes to encourage further studies on CG and SMEs in developing and non-developed countries.