We discover this dilemma in the context of small publicly traded Canadian companies. We exploit the reality that such companies were not subject to corporate governance guidelines prior to 2005 and thereby assess the determinants of voluntary government practice choices, in addition to the effects of these practices on business performance.
Using a distinctive data set, we build a corporate governance index for every firm. We measure performance by two variables: quality of fiscal performance and accounting gains. The results suggest that corporate governance does matter for Canadian companies that are smaller traded. We find that accounting and financial performance are positively associated with corporate governance; yet, their underlying mechanisms may differ somewhat. Given this result, it will be natural to expect all businesses to choose higher rates of government. However, our results also indicate resource constraints that limit their choices are faced by small companies. We conclude that good government is an important driver of small firm operation that the owners and managers of these firms neglect cannot.
PUBLICATION DATE: November 15, 2012 PRODUCT #: BH502-HCB-ENG
This is just an excerpt. This case is about LEADERSHIP & MANAGING PEOPLE
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