Most of the evidence for the determinants and effects of corporate governance practices based on large companies. Here we explore these questions in the context of small publicly traded Canadian companies. We exploit the fact that such companies not subject to the corporate governance guidelines prior to 2005, to analyze the determinants of voluntary governance practice decisions and the impact of these practices on the company’s success. Using a unique data set, we construct a corporate governance … Read more »

Most of the evidence for the determinants and effects of corporate governance practices based on large companies. Here we explore these questions in the context of small publicly traded Canadian companies. We exploit the fact that such companies not subject to the corporate governance guidelines prior to 2005, to analyze the determinants of voluntary governance practice decisions and the impact of these practices on the company’s success. Using a unique data set, we construct a corporate governance index for each company. We measure performance by two variables: quality of accounting earnings and financial performance. The results show that corporate governance does matter for smaller traded Canadian companies. We find that both accounting and earnings positively related to corporate governance, but the underlying mechanisms may differ slightly. Given this result, it would be natural to expect to select all companies to higher levels of governance. However, our results also show small firms provide scarce resources that limit their choices. We conclude that good governance is an important driver of the small firm performance, which can not from the owners and managers of these firms are neglected.
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from
Irene Gordon,
Karel Hrazdil,
Daniel Shapiro
Source: Business Horizons
9 sides.
Release Date: 15, November 2012. Prod #: BH502-PDF-ENG
Corporate governance in listed small businesses: A study of the Canadian Venture Exchange HBR case solution

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