Corporate Governance, Small Medium Enterprises (SMEs) and Firm’s Performance: Evidence from Construction Business, Construction Industry Development Board (CIDB) Malaysia

Abstract

Utilising agency theory, this research used primary data to identify the depth of the underlying structure and test the relationship between the variables. In addressing these issues, the study applied logistic regression to data collected from questionnaires, the study identifies the underlying structure of 9 items via factor analysis. The relationships between board committee size, board composition, remuneration committee, gender diversity, risk management committee, ownership concentration, audit committee, duality and firm’s performance measured by return on assets (ROA) were analysed by using logistic regression with the application of SAS(9.4) on data collected from 380 small and medium enterprises under the Construction Industry Development Board (CIDB) Malaysia. It was found that board size, board composition, remuneration committee, risk management committee and gender diversity has no significant impact on firm’s performance. While  duality and audit committee have a significant positive relationship with firm’s performance. Meanwhile, ownership concentration has a significant negative relationship with firm’s performance. As a conclusion, the corporate governance mechanism has a significant impact on firm’s performance in the CIDB construction industry in Malaysia. The contribution of this study is deemed significant as this is the first study applied on CIDB registered enterprises in the Klang Valley, using a quantitative research design.