IDEAS home Printed from https://ideas.repec.org/a/eee/bushor/v55y2012i6p583-591.html
   My bibliography  Save this article

Corporate governance in publicly traded small firms: A study of Canadian venture exchange companies

Author

Listed:
  • Gordon, Irene M.
  • Hrazdil, Karel
  • Shapiro, Daniel

Abstract

Most evidence regarding the determinants and effects of corporate governance practices is based on large firms. Herein, we explore these issues in the context of small publicly traded Canadian companies. We exploit the fact that such firms were not subject to corporate governance guidelines prior to 2005 and thus analyze the determinants of voluntary governance practice choices, as well as the effects of those practices on firm performance. Using a unique data set, we construct a corporate governance index for each firm. We measure performance by two variables: quality of accounting earnings and financial performance. The results indicate that corporate governance does matter for smaller traded Canadian firms. We find that both accounting and financial performance are positively related to corporate governance; however, their underlying mechanisms may differ somewhat. Given this result, it would be natural to expect all firms to choose higher levels of governance. However, our results also suggest small firms face resource constraints that limit their choices. We conclude that good governance is an important driver of small firm performance that cannot be neglected by the owners and managers of these firms.

Suggested Citation

  • Gordon, Irene M. & Hrazdil, Karel & Shapiro, Daniel, 2012. "Corporate governance in publicly traded small firms: A study of Canadian venture exchange companies," Business Horizons, Elsevier, vol. 55(6), pages 583-591.
    • Handle: RePEc:eee:bushor:v:55:y:2012:i:6:p:583-591
    DOI: 10.1016/j.bushor.2012.07.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0007681312001140
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.bushor.2012.07.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    2. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    3. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 107-156.
    4. Bin N. Srinidhi & Ferdinand A. Gul, 2007. "The Differential Effects of Auditors' Nonaudit and Audit Fees on Accrual Quality," Contemporary Accounting Research, John Wiley & Sons, vol. 24(2), pages 595-629, June.
    5. Chang-Jui Lin, 2011. "An Examination Of Board And Firm Performance: Evidence From Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 5(4), pages 17-34.
    6. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2008. "Boards: Does one size fit all," Journal of Financial Economics, Elsevier, vol. 87(2), pages 329-356, February.
    7. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
    8. Switzer, Lorne N., 2007. "Corporate governance, Sarbanes-Oxley, and small-cap firm performance," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(5), pages 651-666, December.
    9. Peter Klein & Daniel Shapiro & Jeffrey Young, 2005. "Corporate Governance, Family Ownership and Firm Value: the Canadian evidence," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(6), pages 769-784, November.
    10. Chris Mallin & Kean Ow‐Yong, 1998. "Corporate Governance in Small Companies – the Alternative Investment Market," Corporate Governance: An International Review, Wiley Blackwell, vol. 6(4), pages 224-232, October.
    11. Andreas Charitou & Christodoulos Louca & Stelios Panayides, 2007. "Cross-Listing, Bonding Hypothesis and Corporate Governance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7-8), pages 1281-1306.
    12. Wallace, R. S. Olusegun & Naser, Kamal, 1995. "Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong," Journal of Accounting and Public Policy, Elsevier, vol. 14(4), pages 311-368.
    13. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
    14. Eisenberg, Theodore & Sundgren, Stefan & Wells, Martin T., 1998. "Larger board size and decreasing firm value in small firms," Journal of Financial Economics, Elsevier, vol. 48(1), pages 35-54, April.
    15. Flora F. Niu, 2006. "Corporate governance and the quality of accounting earnings: a Canadian perspective," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(4), pages 302-327, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hezun Li & Siri Terjesen & Timurs Umans, 2020. "Corporate governance in entrepreneurial firms: a systematic review and research agenda," Small Business Economics, Springer, vol. 54(1), pages 43-74, January.
    2. Shamsud D. Chowdhury & Eric Zengxiang Wang, 2020. "Board size, director compensation, and firm transition across stock exchanges: evidence from Canada," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 685-712, September.
    3. Jolien Roelandt & Petra Andries & Mirjam Knockaert, 2022. "The contribution of board experience to opportunity development in high-tech ventures," Small Business Economics, Springer, vol. 58(3), pages 1627-1645, March.
    4. Ghosh, Saibal, 2018. "Governance reforms and performance of MENA banks: Are disclosures effective?," Global Finance Journal, Elsevier, vol. 36(C), pages 78-95.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chongwoo Choe & Gloria Tian & Xiangkang Yin, 2008. "Managerial Power, Stock-Based Compensation, And Firm Performance: Theory And Evidence," Monash Economics Working Papers 21/08, Monash University, Department of Economics.
    2. Masulis, Ronald W. & Wang, Cong & Xie, Fei, 2012. "Globalizing the boardroom—The effects of foreign directors on corporate governance and firm performance," Journal of Accounting and Economics, Elsevier, vol. 53(3), pages 527-554.
    3. Naeem Tabassum & Satwinder Singh, 2020. "Corporate Governance and Organisational Performance," Springer Books, Springer, number 978-3-030-48527-6, September.
    4. Pascal Nguyen & Nahid Rahman, 2015. "Which governance characteristics affect the incidence of divestitures in Australia?," Australian Journal of Management, Australian School of Business, vol. 40(2), pages 351-374, May.
    5. Drobetz, Wolfgang & von Meyerinck, Felix & Oesch, David & Schmid, Markus, 2014. "Board Industry Experience, Firm Value, and Investment Behavior," Working Papers on Finance 1401, University of St. Gallen, School of Finance, revised Dec 2015.
    6. Georgeta Vintila & Stefan Cristian Gherghina, 2013. "Board of Directors Independence and Firm Value: Empirical Evidence Based on the Bucharest Stock Exchange Listed Companies," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 885-900.
    7. Loderer, Claudio & Waelchli, Urs, 2010. "Firm age and performance," MPRA Paper 26450, University Library of Munich, Germany.
    8. Baran, Lindsay & Forst, Arno, 2015. "Disproportionate insider control and board of director characteristics," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 62-80.
    9. Andreou, Panayiotis C. & Louca, Christodoulos & Panayides, Photis M., 2014. "Corporate governance, financial management decisions and firm performance: Evidence from the maritime industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 63(C), pages 59-78.
    10. Chenglong Zheng & Roy Kouwenberg, 2019. "A Bibliometric Review of Global Research on Corporate Governance and Board Attributes," Sustainability, MDPI, vol. 11(12), pages 1-25, June.
    11. Cremers, K.J. Martijn & Litov, Lubomir P. & Sepe, Simone M., 2017. "Staggered boards and long-term firm value, revisited," Journal of Financial Economics, Elsevier, vol. 126(2), pages 422-444.
    12. Lee, Shih-Cheng & Lin, Chien-Ting, 2010. "An accounting-based valuation approach to valuing corporate governance in Taiwan," Journal of Contemporary Accounting and Economics, Elsevier, vol. 6(2), pages 47-60.
    13. Franco Ernesto Rubino & Paolo Tenuta & Domenico Rocco Cambrea, 2017. "Board characteristics effects on performance in family and non-family business: a multi-theoretical approach," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 623-658, September.
    14. Gregorio Sánchez‐Marín & María Encarnación Lucas‐Pérez & Samuel Baixauli‐Soler & Brian G.M. Main & Antonio Mínguez‐Vera, 2022. "Excess executive compensation and corporate governance in the United Kingdom and Spain: A comparative analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2817-2837, October.
    15. Giannetti, Mariassunta & Yu, Xiaoyun & Liao, Guanmin, 2012. "The Brain Gain of Corporate Boards: A Natural Experiment from China," CEPR Discussion Papers 9190, C.E.P.R. Discussion Papers.
    16. Thomas Smythe & Chris McNeil & Philip English, 2015. "When does CalPERS’ activism add value?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(4), pages 641-660, October.
    17. Berezinets, Irina & Ilina, Yulia & Muravyev, Alexander, 2011. "CEO and Board Characteristics as Determinants of Private Benefits of Control: Evidence from the Russian Stock Exchange," IZA Discussion Papers 6256, Institute of Labor Economics (IZA).
    18. Robert Campbell & Chinmoy Ghosh & Milena Petrova & C. Sirmans, 2011. "Corporate Governance and Performance in the Market for Corporate Control: The Case of REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 451-480, May.
    19. Bill Francis & Iftekhar Hasan & Qiang Wu, 2015. "Professors in the Boardroom and Their Impact on Corporate Governance and Firm Performance," Financial Management, Financial Management Association International, vol. 44(3), pages 547-581, September.
    20. Tian, Gloria Y. & Twite, Garry, 2011. "Corporate governance, external market discipline and firm productivity," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 403-417, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:bushor:v:55:y:2012:i:6:p:583-591. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/bushor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.