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SUPPORTING FACTORS FOR THE SUCCESSFUL IMPLEMENTATION OF CORPORATE GOVERNANCE IN HANDICRAFT SMES
Corresponding Author(s) : Nizar Alam Hamdani
Humanities & Social Sciences Reviews,
Vol. 8 No. 1 (2020): January
Abstract
Purpose of Study: This research is to analysis and study factors that influence the successful implementation of good corporate governance in handicraft SMEs based on several factors related to business ethics, public information, and the company's ability to develop, be sustainable and compete. This study also aims to create a new element from several groups of factors that can be categorized based on grouping in a component matrix.
Methodology: This research was conducted using a descriptive correlational design. The samples were 54 handicraft SMEs that have implemented corporate governance principles in five regencies in West Governance. The sampling technique uses simple random sampling in 5 districts in West Java Province. Data processing used Exploratory Factor Analysis (EFA).
Main Findings: The results show that the four factors support the successful implementation of Handicraft SME's corporate governance. The first factor is profitability, financial report integrity, and competitiveness, this primary factor is called competitiveness. The second factor is decision making, business ethics, and planning and organizing aspects, and this factor is called leadership. The third factor is sustainability and access to banking and this factor is called the bankable factor. The fourth factor consists of growth and public information, and these factors are called growth factors.
Applications of this study: The results of this study can be used as a reference by handicraft SMEs to develop business management to improve leadership factors and maintain growth so that it becomes bankable and competitive. This information is also useful for investors and financial service providers to provide capital to handicraft SMEs.
Novelty / Originality of this study: First, this research formed a new factor that supports the success of governance in handicraft SMEs; these factors are leadership, competitiveness, bankable, and growth. These four factors are the main factors determining the successful implementation of corporate governance in handicraft SMEs. Both of these studies combine several concepts from previous research the characteristics of SMEs in West Java, Indonesia.
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- Abor, J., & Adjasi, C. K. D. (2007). Corporate governance and the small and medium enterprises sector: theory and implications. Corporate Governance: The International Journal of Business in Society, 7(2), 111–122. https://doi.org/10.1108/14720700710739769 DOI: https://doi.org/10.1108/14720700710739769
- Afande, F. O. (2015). Adoption of Corporate Governance Practices and Financial Performance of Small and Medium Enterprises in Kenya. Research Journal of Finance and Accounting ISSN, 6(5), 36–74.
- Amoako, K. O., Marfo, E. O., Gyabaah, E. N., & Gyamfi, O. (2014). Accounting records keeping practices of SMEs in Ghana: Evidence from Sunyani Municipality. British Journal of Economics, Finance and Management Sciences, 9(1), 120–132.
- Amoateng, A. K., Osei, K. T., Ofori, A., & Gyabaa, E. N. (2017). Empirical Study On The Impact Of Corporate Governance Practices On Performance: Evidence From SMEs In An Emerging Economy. European Journal of Accounting Auditing and Finance Research, 5(8), 50–61.
- Arosa, B., Iturralde, T., & Maseda, A. (2013). The board structure and firm performance in SMEs : Evidence from Spain à¬. Investigaciones Europeas de Dirección Y EconomÃa de La Empresa, 19(2), 127–135. https://doi.org/10.1016/j.iedee.2012.12.003 DOI: https://doi.org/10.1016/j.iedee.2012.12.003
- ASX. (2006). Principles of Good Corporate Governance and Good Practice Recommendations. Australia.
- Ateba, B. B., Ohei, K., Maredza, A., Deka, P., & Schutte, D. (2015). Marketing mix : it ’ s role in customer satisfaction in the South African banking retailing. Banks and Bank Systems, 10(1), 83–91.
- Chittithaworn, C., Islam, A., Hasliza, D., & Yusuf, M. (2011). Factors Affecting Business Success of Small & Medium Enterprises ( SMEs ) in Thailand. Kualitas, Kapabilitas, Atau Kekuatan Untuk Menimbulkan Kepercayaan, 7(5), 180–190. https://doi.org/10.5539/ass.v7n5p180 DOI: https://doi.org/10.5539/ass.v7n5p180
- Gill, A., Sharma, S. P., Mand, H. S., & Mathur, N. (2012). The relationship between corporate governance and the investment decision of small business firms in India. Journal of Finance and Investment Analysis, 1(2), 41–59.
- Gü, Y., & Apak, S. (2014). Comparison of public and non- public SMEs ' corporate governance strategies in Turkey. In 10th International Strategic Management Conference Comparison (Vol. 150, pp. 162–171). Istanbul, Turkey. https://doi.org/10.1016/j.sbspro.2014.09.022 DOI: https://doi.org/10.1016/j.sbspro.2014.09.022
- Hamad, S. Ben. (2011). The SMEs Governance Mechanisms Practices and Financial Performance : Case of Tunisian Industrial SMEs. International Journal of Business and Management, 6(7), 216–225. https://doi.org/10.5539/ijbm.v6n7p216 DOI: https://doi.org/10.5539/ijbm.v6n7p216
- Hamdani, N. A. (2018). Building Knowledge Creation For Making Business Competition Atmosphere in SME of Batik. Management Science Letters, 8, 667–676. https://doi.org/10.5267/j.msl.2018.4.024 DOI: https://doi.org/10.5267/j.msl.2018.4.024
- Hamdani, N. A., & Susilawati, W. (2018). Application of Information System Technology and Learning Organization to Product Innovation Capability and Its Impact On Business Performance of Leather Tanning Industry. International Journal of Engineering and Technology, 7, 393–397. https://doi.org/10.14419/ijet.v7i2.29.13661 DOI: https://doi.org/10.14419/ijet.v7i2.29.13661
- Hanifah. (2015). The Implementation Of Good Corporate Governance In Efforts To Increase Profits In Small Medium Enterprises ( SMEs ). International Journal of Business, Economics and Law, 7(3), 38–45.
- Hove-sibanda, P., Sibanda, K., Pooe, D., West, N., & Africa, S. (2013). The impact of corporate governance on firm competitiveness and performance of small and medium enterprises in South Africa : A case of small and medium enterprises in Vanderbijlpark. Independent Research Journal in the Management Sciences, 1–11. https://doi.org/10.4102/ac.v17i1.446
- Ilyas, M., & Rafiq, M. (2012). Impact of Corporate Governance on Perceived Organizational Success Department of Economics. International Journal of Business and Social Science, 3(13), 178–187.
- Iskander, M., & Chamlou, N. (2000). Corporate Governance : Corporate Governance: A Framework for Implementation. World Bank Report. Washington DC, USA. https://doi.org/10.1596/0-8213-4741-1 DOI: https://doi.org/10.1596/0-8213-4741-1
- Jaswadi. (2017). Analisis tingkat implementasi good corporate governance pada usaha kecil dan menengah Analisis Tingkat Implementasi Good Corporate Governance Pada Usaha Kecil dan Menengah Usaha mikro , kecil dan menengah ( UMKM ) merupakan bagian sangat penting dalam per. Jurnal Siasat Bisnis, 20(2), 161–180. https://doi.org/10.20885/jsb.vol20.iss2.art5 DOI: https://doi.org/10.20885/jsb.vol20.iss2.art5
- Khan, H. (2011). A Literature Review of Corporate Governance. In International Conference on E-business, Management and Economics (Vol. 25, pp. 1–5). Singapore: IACSIT Press, Singapore.
- Komite Nasional Kebijakan Governance. Pedoman Umum Good Corporate Governance Indonesia, Pub. L. No. KEP/31/M.EKUIN/08/1999, Pedoman Umum Good Corporate Governance Indonesia 30 (2006). Jakarta, Indonesia: Komite Nasional Kebijakan Governance. Retrieved from www.governance-Indonesia.or.id
- Lashgari, C. M. (2004). Corporate Governance: Theory and Practice. Journal of American Academy of Business, Cambridge., 5(1/2), 46–51. Retrieved from http://www.jaabc.com
- Lekhanya, L. M. (2015). Leadership And Corporate Governance Of Small And Medium Enterprises ( SMEs ) in South Africa : Public Perceptions. Corporate Ownership & Control /, 12(3), 215–222. https://doi.org/10.22495/cocv12i3c2p1 DOI: https://doi.org/10.22495/cocv12i3c2p1
- MudashiruI and Bakare. (2014). Good Corporate Governance and Organisational Performance : An Empirical Analysis Adebayo, Mudashiru Department of Accounting and Finance Faculty of Management Sciences Lagos State University Nigeria Ibrahim, A. O. Bakare Department of Economics Facult, 4(7), 170–178.
- Nainawat, R., & Meena, R. (2013). Corporate governance and business ethics. Global Journal of Management and Business Studies, 3(10), 1085–1090.
- Narwal, K. P., & Jindal, S. (2015). The Impact of Corporate Governance on the Profitability : An Empirical Study of Indian Textile Industry, 3(2), 81–85.
- OECD. (2018). Enabling SMEs to scale up 1. The 2018 OECD Ministerial Conference on Strengthening SMEs and Entrepreneurship for Productivity and Inclusive Growth is part of the OECD Bologna Process on SME and Entrepreneurship Policies. Mexico City.
- Patrick, E. A., Paulinus, E. C., & Nympha, A. N. (2015). The Influence of Corporate Governance on Earnings Management Practices : A Study of Some Selected Quoted Companies in Nigeria. American Journal of Economics, Finance and Management, 1(5), 482–493.
- Sunarto, H. (2010). Implementasi Corporate Governance Masuk Dalam Pemeringkatan Corporate Governance Perception Index ( Cgpi ) Tahun 2008-2010. Media Riset Akuntansi, Auditing & Informasi, 12(3), 59–75. https://doi.org/10.25105/mraai.v12i3.597 DOI: https://doi.org/10.25105/mraai.v12i3.597
- Suyono, E. (2018). Penerapan Tata Kelola Perusahaan yang Baik dalam Pengelolaan Usaha Kecil dan Menengah : Sebuah Telaah Konseptual. In PROSIDING SEMINAR NASIONAL & CALL FOR PAPERS 2017 Optimalisasi. Semarang: Fakultyas Ekonomi dan Bisnis UNTAG Semarang.
- Thomas S. Kaihatu. (2006). Good corporate governance dan penerapannya di Indonesia. Jurnal Manajemen Dan Kewirausahaan, 8(1), pp.1-9. https://doi.org/10.9744/jmk.8.1.pp. 1-9
- Umrani, A. I., Johl, S. K., & Ibrahim, M. Y. (2015). Corporate Governance Practices and Problems Faced By SMEs in Malaysia. Global Business and Management Research: An International Journal Vol., 7(2), 71–77.
- Velnampy, T. (2014). Corporate Governance and Firm Performance : A Study of Sri Lankan Corporate Governance and Firm Performance : A Study of Sri Lankan Manufacturing Companies. Journal of Economics and Sustainable Development, 4(3), 228–235.
- Yacuzzi, E. (2005). A Primer On Governance And Performance In Small And Medium-Sized Enterprises. Journal of Business Management, 2(1), 22–34. https://doi.org/10.2139/ssrn.998589 DOI: https://doi.org/10.2139/ssrn.998589
- Yusof, N. Z. M. (2016). Context Matters : A Critique of Agency Theory in Corporate Governance Research in Emerging Countries. International Journal of Economics and Financial, 6(7), 154–158.
References
Abor, J., & Adjasi, C. K. D. (2007). Corporate governance and the small and medium enterprises sector: theory and implications. Corporate Governance: The International Journal of Business in Society, 7(2), 111–122. https://doi.org/10.1108/14720700710739769 DOI: https://doi.org/10.1108/14720700710739769
Afande, F. O. (2015). Adoption of Corporate Governance Practices and Financial Performance of Small and Medium Enterprises in Kenya. Research Journal of Finance and Accounting ISSN, 6(5), 36–74.
Amoako, K. O., Marfo, E. O., Gyabaah, E. N., & Gyamfi, O. (2014). Accounting records keeping practices of SMEs in Ghana: Evidence from Sunyani Municipality. British Journal of Economics, Finance and Management Sciences, 9(1), 120–132.
Amoateng, A. K., Osei, K. T., Ofori, A., & Gyabaa, E. N. (2017). Empirical Study On The Impact Of Corporate Governance Practices On Performance: Evidence From SMEs In An Emerging Economy. European Journal of Accounting Auditing and Finance Research, 5(8), 50–61.
Arosa, B., Iturralde, T., & Maseda, A. (2013). The board structure and firm performance in SMEs : Evidence from Spain à¬. Investigaciones Europeas de Dirección Y EconomÃa de La Empresa, 19(2), 127–135. https://doi.org/10.1016/j.iedee.2012.12.003 DOI: https://doi.org/10.1016/j.iedee.2012.12.003
ASX. (2006). Principles of Good Corporate Governance and Good Practice Recommendations. Australia.
Ateba, B. B., Ohei, K., Maredza, A., Deka, P., & Schutte, D. (2015). Marketing mix : it ’ s role in customer satisfaction in the South African banking retailing. Banks and Bank Systems, 10(1), 83–91.
Chittithaworn, C., Islam, A., Hasliza, D., & Yusuf, M. (2011). Factors Affecting Business Success of Small & Medium Enterprises ( SMEs ) in Thailand. Kualitas, Kapabilitas, Atau Kekuatan Untuk Menimbulkan Kepercayaan, 7(5), 180–190. https://doi.org/10.5539/ass.v7n5p180 DOI: https://doi.org/10.5539/ass.v7n5p180
Gill, A., Sharma, S. P., Mand, H. S., & Mathur, N. (2012). The relationship between corporate governance and the investment decision of small business firms in India. Journal of Finance and Investment Analysis, 1(2), 41–59.
Gü, Y., & Apak, S. (2014). Comparison of public and non- public SMEs ' corporate governance strategies in Turkey. In 10th International Strategic Management Conference Comparison (Vol. 150, pp. 162–171). Istanbul, Turkey. https://doi.org/10.1016/j.sbspro.2014.09.022 DOI: https://doi.org/10.1016/j.sbspro.2014.09.022
Hamad, S. Ben. (2011). The SMEs Governance Mechanisms Practices and Financial Performance : Case of Tunisian Industrial SMEs. International Journal of Business and Management, 6(7), 216–225. https://doi.org/10.5539/ijbm.v6n7p216 DOI: https://doi.org/10.5539/ijbm.v6n7p216
Hamdani, N. A. (2018). Building Knowledge Creation For Making Business Competition Atmosphere in SME of Batik. Management Science Letters, 8, 667–676. https://doi.org/10.5267/j.msl.2018.4.024 DOI: https://doi.org/10.5267/j.msl.2018.4.024
Hamdani, N. A., & Susilawati, W. (2018). Application of Information System Technology and Learning Organization to Product Innovation Capability and Its Impact On Business Performance of Leather Tanning Industry. International Journal of Engineering and Technology, 7, 393–397. https://doi.org/10.14419/ijet.v7i2.29.13661 DOI: https://doi.org/10.14419/ijet.v7i2.29.13661
Hanifah. (2015). The Implementation Of Good Corporate Governance In Efforts To Increase Profits In Small Medium Enterprises ( SMEs ). International Journal of Business, Economics and Law, 7(3), 38–45.
Hove-sibanda, P., Sibanda, K., Pooe, D., West, N., & Africa, S. (2013). The impact of corporate governance on firm competitiveness and performance of small and medium enterprises in South Africa : A case of small and medium enterprises in Vanderbijlpark. Independent Research Journal in the Management Sciences, 1–11. https://doi.org/10.4102/ac.v17i1.446
Ilyas, M., & Rafiq, M. (2012). Impact of Corporate Governance on Perceived Organizational Success Department of Economics. International Journal of Business and Social Science, 3(13), 178–187.
Iskander, M., & Chamlou, N. (2000). Corporate Governance : Corporate Governance: A Framework for Implementation. World Bank Report. Washington DC, USA. https://doi.org/10.1596/0-8213-4741-1 DOI: https://doi.org/10.1596/0-8213-4741-1
Jaswadi. (2017). Analisis tingkat implementasi good corporate governance pada usaha kecil dan menengah Analisis Tingkat Implementasi Good Corporate Governance Pada Usaha Kecil dan Menengah Usaha mikro , kecil dan menengah ( UMKM ) merupakan bagian sangat penting dalam per. Jurnal Siasat Bisnis, 20(2), 161–180. https://doi.org/10.20885/jsb.vol20.iss2.art5 DOI: https://doi.org/10.20885/jsb.vol20.iss2.art5
Khan, H. (2011). A Literature Review of Corporate Governance. In International Conference on E-business, Management and Economics (Vol. 25, pp. 1–5). Singapore: IACSIT Press, Singapore.
Komite Nasional Kebijakan Governance. Pedoman Umum Good Corporate Governance Indonesia, Pub. L. No. KEP/31/M.EKUIN/08/1999, Pedoman Umum Good Corporate Governance Indonesia 30 (2006). Jakarta, Indonesia: Komite Nasional Kebijakan Governance. Retrieved from www.governance-Indonesia.or.id
Lashgari, C. M. (2004). Corporate Governance: Theory and Practice. Journal of American Academy of Business, Cambridge., 5(1/2), 46–51. Retrieved from http://www.jaabc.com
Lekhanya, L. M. (2015). Leadership And Corporate Governance Of Small And Medium Enterprises ( SMEs ) in South Africa : Public Perceptions. Corporate Ownership & Control /, 12(3), 215–222. https://doi.org/10.22495/cocv12i3c2p1 DOI: https://doi.org/10.22495/cocv12i3c2p1
MudashiruI and Bakare. (2014). Good Corporate Governance and Organisational Performance : An Empirical Analysis Adebayo, Mudashiru Department of Accounting and Finance Faculty of Management Sciences Lagos State University Nigeria Ibrahim, A. O. Bakare Department of Economics Facult, 4(7), 170–178.
Nainawat, R., & Meena, R. (2013). Corporate governance and business ethics. Global Journal of Management and Business Studies, 3(10), 1085–1090.
Narwal, K. P., & Jindal, S. (2015). The Impact of Corporate Governance on the Profitability : An Empirical Study of Indian Textile Industry, 3(2), 81–85.
OECD. (2018). Enabling SMEs to scale up 1. The 2018 OECD Ministerial Conference on Strengthening SMEs and Entrepreneurship for Productivity and Inclusive Growth is part of the OECD Bologna Process on SME and Entrepreneurship Policies. Mexico City.
Patrick, E. A., Paulinus, E. C., & Nympha, A. N. (2015). The Influence of Corporate Governance on Earnings Management Practices : A Study of Some Selected Quoted Companies in Nigeria. American Journal of Economics, Finance and Management, 1(5), 482–493.
Sunarto, H. (2010). Implementasi Corporate Governance Masuk Dalam Pemeringkatan Corporate Governance Perception Index ( Cgpi ) Tahun 2008-2010. Media Riset Akuntansi, Auditing & Informasi, 12(3), 59–75. https://doi.org/10.25105/mraai.v12i3.597 DOI: https://doi.org/10.25105/mraai.v12i3.597
Suyono, E. (2018). Penerapan Tata Kelola Perusahaan yang Baik dalam Pengelolaan Usaha Kecil dan Menengah : Sebuah Telaah Konseptual. In PROSIDING SEMINAR NASIONAL & CALL FOR PAPERS 2017 Optimalisasi. Semarang: Fakultyas Ekonomi dan Bisnis UNTAG Semarang.
Thomas S. Kaihatu. (2006). Good corporate governance dan penerapannya di Indonesia. Jurnal Manajemen Dan Kewirausahaan, 8(1), pp.1-9. https://doi.org/10.9744/jmk.8.1.pp. 1-9
Umrani, A. I., Johl, S. K., & Ibrahim, M. Y. (2015). Corporate Governance Practices and Problems Faced By SMEs in Malaysia. Global Business and Management Research: An International Journal Vol., 7(2), 71–77.
Velnampy, T. (2014). Corporate Governance and Firm Performance : A Study of Sri Lankan Corporate Governance and Firm Performance : A Study of Sri Lankan Manufacturing Companies. Journal of Economics and Sustainable Development, 4(3), 228–235.
Yacuzzi, E. (2005). A Primer On Governance And Performance In Small And Medium-Sized Enterprises. Journal of Business Management, 2(1), 22–34. https://doi.org/10.2139/ssrn.998589 DOI: https://doi.org/10.2139/ssrn.998589
Yusof, N. Z. M. (2016). Context Matters : A Critique of Agency Theory in Corporate Governance Research in Emerging Countries. International Journal of Economics and Financial, 6(7), 154–158.