Effective regulation of SMEs is essential to maintain equilibrium within the organization and the economy. The regulation should incorporate measures to ensure transparency, accountability, and the disclosure of all pertinent financial information. Monitoring Small and Medium-sized Enterprises' (SMEs) operations and financial data is crucial because accounting functions ensure their competitive advantage and continuous growth. This chapter aims to establish comprehensive guidelines for regulating all aspects to ensure the effectiveness of its implementation. The interviewees will offer novel and practical insights into every facet of SME operations. This article emphasizes the need to prioritize responsibility, accountability, and transparency. All the essential information discussed thus far must be considered to safeguard the public interest and the interests of the stakeholders involved with SMEs.
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This research thoroughly analyzes the perspectives and attitudes of small and medium-sized enterprises (SMEs) regarding the corporate governance framework and disclosure obligations that are customized to meet their unique needs.
When one thinks of the term “corporate governance,” the first thing that typically comes to mind is the corporation itself, as well as how the corporation or organization in question is managed in the day-to-day operations of its business (Casey, 2024; Stoelhorst & Vishwanathan, 2024; Ogbechie & Arije, 2023; Stoelhorst & Vishwanathan, 2024). In this particular instance, (Chew & Chew, 2008) have acknowledged that a corporation is a “complex set of explicit and implicit contracts,” which can be understood as a form of contracts between various claimants within the organization to accomplish particular goals. This adheres to the American definition of corporate governance, which states that it is an “implicit term of the contract between shareholders and the firm, i.e., the claimants to agree on the managers or director's duty to maximize shareholders' value in the firm.” (Secretariat to National SME Development Council Bank Negara Malaysia 2005). In addition, the principles developed by the Organization for Economic Co-operation and Development (OECD) have come to the same conclusion as the one presented above and defined corporate governance as “a set of relationships between a company's management, its board, its shareholders, and other stakeholders” (Rost, 2010).
Through increased access to capital and financial markets, implementing corporate governance principles can benefit corporations' owners and managers and improve transparency and disclosure in the corporate environment (Ellili, 2023; Lin & Qamruzzaman, 2023; Dimes & Molinari, 2023; Boateng et al., 2022; Lebedeva et al., 2016). In addition, it will contribute to surviving and sustaining in an increasingly competitive situation by merging, acquiring, forming partnerships, and reducing risk through asset diversification (Malatesta & Smith, 2014). On the other hand, it will provide an exit policy, guarantee a smooth inter-generational shift of assets and divestment of family wealth, and reduce the likelihood of conflicts of interest.
SMEs are an essential part of the overall economy in Malaysia (Azam & Abdullah, 2024; Jaish et al., 2023; Krishnan et al., 2024; Ishak & Thiruchelvam, 2024) because they account for 99.2 percent of all commercial establishments in the country and account for approximately 65 percent of all jobs in the market (Bank Negara Malaysia, 2006; (Madanchian et al., 2015; Razak et al., 2015; Auzzir et al., 2018; Nor-Aishah et al., 2020)). Moreover, small and medium-sized enterprises (SMEs) in Malaysia contribute 32% of the country's total gross domestic product (GDP), and SMEs also account for 19% of the country's total export value (Tahir et al., 2018; Zafar & Mustafa, 2017; Auzzir et al., 2018)). On the other hand, the service industry makes up most of Malaysia's small and medium-sized enterprises (SMEs), followed by the manufacturing and agricultural sectors (Bank Negara Malaysia, 2006).