Corporate governance and financial literacy in small and medium enterprises ( SMEs)

Abstract

Small and Medium Enterprises (SMEs) are vital contributors to economic development and innovation, particularly in emerging economies. This study explores the relationship between corporate governance, financial literacy, and SME performance, focusing on key dimensions such as board composition, financial resources, training and development, and transparency. Using data from 384 SMEs and employing descriptive statistics, correlation, and regression analysis, the research highlights the significant role of governance and literacy in enhancing SME outcomes. Descriptive statistics indicate that financial resources are the most variable and impactful factor across SMEs, while SME performance shows the least variability, reflecting consistency in outcomes. Correlation analysis reveals strong positive relationships between SME performance and financial resources, transparency, and training and development. Regression results demonstrate that corporate governance and financial literacy variables explain 46.7% of the variance in SME performance, with training and development and financial resources being the most influential predictors. The findings underscore the need for targeted training programs, robust financial resource management, and transparent practices to drive SME performance. While board composition and financial literacy showed moderate effects, they remain critical for strategic decision-making and sustainability. Practical implications include policy recommendations for enhancing training, transparency, and financial literacy, while future research should explore sector-specific dynamics, regional comparisons, and the integration of technology in governance and literacy practices. This study provides actionable insights for SME managers and policymakers, emphasizing the importance of governance and literacy in fostering long-term growth and competitiveness.

Keywords: Small and Medium Enterprises, Board Composition, Financial Literacy, Financial Resources, Transparency, Training and Development.