Corporate Governance in Publicly Traded Small Firms: A Study of Canadian Venture Exchange Companies

Posted: 15 Nov 2010 Last revised: 21 Oct 2012

See all articles by Karel Hrazdil

Karel Hrazdil

Simon Fraser University

Irene M. Gordon

Beedie School of Business, Simon Fraser University

Daniel M. Shapiro

Simon Fraser University (SFU) - Policy Analysis Area

Date Written: February 1, 2012

Abstract

Most evidence on the determinants and effects of corporate governance practices is based on large firms. In this paper 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 dataset, 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 both accounting and financial performance being positively related to corporate governance, although the 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 owners and managers of these firms.

Keywords: Corporate governance, Earnings quality, Venture Exchange, Firm performance

JEL Classification: G12, G14

Suggested Citation

Hrazdil, Karel and Gordon, Irene M. and Shapiro, Daniel, Corporate Governance in Publicly Traded Small Firms: A Study of Canadian Venture Exchange Companies (February 1, 2012). Business Horizons, Vol. 55, No. 6, pp. 583-591, 2012, Available at SSRN: https://ssrn.com/abstract=1709676 or http://dx.doi.org/10.2139/ssrn.1709676

Karel Hrazdil (Contact Author)

Simon Fraser University ( email )

Faculty of Business Administration
8888 University Drive, Simon Fraser University
Burnaby, British Colombia V5A 1S6
Canada
778-782-6790 (Phone)
778-782-4920 (Fax)

HOME PAGE: http://www.sfubusiness.ca

Irene M. Gordon

Beedie School of Business, Simon Fraser University ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Daniel Shapiro

Simon Fraser University (SFU) - Policy Analysis Area ( email )

Room 2400 - 515 West Hastings St.
Burnaby, British Columbia V5A 1S6
Canada
604-291-5155 (Phone)
604-291-5122 (Fax)

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