Differences in Financial Performance between SMEs: the discriminating effects of substitution or complementarity between the Board of Directors and the Advisory Board
The purpose of this article is to establish whether substitutive or complementarity of Advisory Board on the Board of Directors generates differences in the financial performance of SMEs. Two objectives were assigned at the start of this research. The first objective is to ascertain whether they are any significant differences regarding the performance of SMEs, between subsamples that make of the advisory or not. Secondly, the research set out to gage whether these differences are caused by the presence of the advisor board or some other factors. A convenience sample of 70 Cameroonian SMEs was selected to conduct the analysis. A descriptive analysis shows that 54.3% of SMEs use Advisory Board to supplement the Board of director, 30% of SMEs have only Advisory Board and 15.7% of SMEs either use Board of director exclusively or nothing at all. However, inferential analysis shows that the sample of SMEs which combines Board of director and Advisory Board, and that which uses Advisory Board to the detriment of the Board of director, have financial performance superior to that of other SMEs that the use of the Advisory Board improve the financial performance of SMEs. These results clearly show that the use of the Advisory Board is a determinant of the difference between SMEs when it is present to supplement the Board of director or to replace it. The limitations of this research are small sample size and the non-probabilistic sampling method, which would prevent the generalization of the results. However, this research is an opportunity for researchers and SME actors to take Advisory Board seriously as SME governance mechanisms. Researchers should seek to establish the optimal characteristics of the Advisory Board. For SME owner managers, Advisory Board can provide the foundations for good performance and the sustainability of theirs businesses.
Type of paper: Empirical research
JEL classification: G23, G30, G34, M38
Copyright (c) 2022 Robert HOROGBE, Mohamed DAIROU
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