Abstract
Small and medium enterprises (SMEs) have become the backbone for the Malaysian economy and the engine for the country’s growth and innovation. SMEs represent 99.2 % of the total business establishments and have contributed 59 % of total employment as well as 32 % of GDP for Malaysia. The government transformation program (GTP) initiated by the Malaysian government has focused on SMEs to ensure the relevancy, sustainability, and competitive edge of this industry, especially in the global market. Hence, the current study investigates the effectiveness of the financial incentives provided by the government, as well as the governance aspect, which can be associated with SMEs’ performance. The current study used tax incentives and leverage as proxy for financial incentives, while the board size is used to proxy the governance issue. The sample comprised of 1,377 SMEs’ firm-years collected from the period of 2000–2010. The findings of this study suggest that tax incentives have a positive impact on SMEs’ performance. However, leverage and board size have a negative relationship with SMEs’ performance. Thus, the findings suggest that tax incentives provided by the government, the less leverage enterprises, and smaller board size enhance the performance of SMEs. This study provides important feedback to the policymakers in evaluating the financial incentive scheme and enforcing corporate governance on SMEs toward sustaining this industry.
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Acknowledgment
The authors would like to convey their appreciation to the Ministry of Higher Education of Malaysia for granting the Fundamental Research Grant Scheme (FRGS) to undertake this project. Appreciation also goes to the Accounting Research Institute (ARI), Faculty of Accountancy, and Research Management Institute (RMI) for their supports to complete this study.
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Noor, R.M., Shuid, S.H., Shamsudin, S.M., Hussin, S.N.A. (2016). SMEs’ Performance: Financial Incentives and Governance. In: Mohd Sidek, N., Ali, S., Ismail, M. (eds) Proceedings of the ASEAN Entrepreneurship Conference 2014. Springer, Singapore. https://doi.org/10.1007/978-981-10-0036-2_11
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DOI: https://doi.org/10.1007/978-981-10-0036-2_11
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