An investigation into the importance of corporate governance in Zimbabwean Small and Medium Scale Enterprises

Abstract

The study set out to investigate the importance of corporate governance in Small and Medium Enterprises in Zimbabwe. The main objective was to find out if there was a positive relationship between corporate governance practices and business performance. The sub-objectives were to establish if there was a link between the corporate governance principles, board independence, internal controls, disclosure and owner-manager separation with business performance. The research took a quantitative approach and used self-administered questionnaires as the research instrument. A sample of 110 questionnaires was collected from the Central Business District and surrounding industrial areas in Harare. Descriptive and inferential tests were performed on the data. The results indicated that the two independent variables internal controls and disclosure had positive relationships with business performance. Board independence and owner-manager separation had no significant effect on business performance. Amongst the demographic variables, educational qualification was an explanatory variable of business performance. The findings led to the conclusion that internal controls and disclosure are predictors of business performance and it is therefore recommended that they be implemented in SMEs. It is further recommended that the level of qualification be taken into account when SMEs are employing management as this has significant impact on the performance of the business.