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Assessing the impact of corporate governance principles on the Small and Medium Enterprises (SMEs)’ financial success in Kwa-Zulu Natal (KZN): Application of Stewardship theory

Author

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  • Tinaye Mahohoma

    (Durban University of Technology)

Abstract

This study investigates how corporate governance (CG) principles affect the financial performance of Small and Medium Enterprises (SMEs) in Kwa-Zulu Natal (KZN), South Africa, using stewardship theory. Corporate governance (CG) encompasses the regulations, procedures, and mechanisms Overseeing the administration and implementation of a business. Efficient corporate governance (CG) is crucial for Small and Medium Enterprises (SMEs) to function with maximum effectiveness and optimise entrepreneurial value. The study seeks to fill this vacuum in information by investigating the impact of using stewardship theory, which prioritises the long-term interests of stakeholders, on the financial performance of small and medium-sized enterprises (SMEs) in KZN.A quantitative approach was employed and a cross-sectional design was employed to survey 217 SMEs in the Durban South area. Descriptive statistics reveal a diversified KZN SME environment, with a predominance of medium-sized businesses, balanced gender representation, and a variety of business ages and educational backgrounds among owners and managers. Inferential statistics show significant correlations between CG principles and financial success metrics of SMEs, particularly affecting returns on invested capital and assets, net profit, asset value, and sales turnover. The results are consistent with earlier studies on the beneficial effects of CG on SME performance. The study is limited to SMEs in the Durban South area and may not be generalizable to other regions. Future research might compare studies across different areas and examine the long-term effects of CG on SMEs to identify optimum practices. The study recommends prioritizing efficient CG procedures tailored to SME needs. It suggests developing business management competencies and advocating for supporting legislation to enhance SME performance. Key Words:Corporate Governance, SMEs, Financial success, Stewardship theory

Suggested Citation

  • Tinaye Mahohoma, 2024. "Assessing the impact of corporate governance principles on the Small and Medium Enterprises (SMEs)’ financial success in Kwa-Zulu Natal (KZN): Application of Stewardship theory," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 13(5), pages 19-27, July.
    • Handle: RePEc:rbs:ijbrss:v:13:y:2024:i:5:p:19-27
    DOI: 10.20525/ijrbs.v13i5.3539
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