Some studies on company performance, carried out before the 2007-2008 crisis, revealed that good corporate governance and good internal control systems lead to better results in the long term view [Bauwhede H.V., 2009], [Larker D.F., Richardson S., Tuna I., 2005]. Over the past years, companies have had to face one of the worst strong financial crises, while economic paradigms, like “too big to fail”, need to be updated or redefined. This study focuses on SMEs because of their economic relevance in the Italian context and of the limited number of studies available to these companies. Can we assume that corporate governance and internal control systems are able to determine better financial performance and SMEs reaction in times of crises? To answer this and look at other related topics from a practical point of view, a research project was defined and launched in 2010 and continued in 2011. It analyzed the Italian context, in particular the Verona and Vicenza areas, with their numerous SMEs. Using a specific questionnaire addressed to SMEs with a local subsidiary in the Verona and Vicenza provinces, companies were asked to provide data on four sections (in a sort of BSC model), believed to be important for determining their financial performance. The relevance of the variables (factors) collected was assessed using a statistical approach. By the beginning of January 2012, around 470 questionnaires had been received, from approximately 10% of the SMEs present in the geographical area considered. In this context the paper aims to analyze the relationship between variables (factors) and financial performance, in order to identify critical ones that impact companies’ results. This could help companies to gain better financial performance, prevent effects of the crisis and to adopt good business practices concerning the structure and processes of corporate governance and internal control system.
CORPORATE GOVERNANCE AND INTERNAL CONTROL SYSTEM: IMPACT ON FINANCIAL PERFORMANCE IN PERIOD OF CRISIS. EVIDENCE FROM AN EMPIRICAL SURVEY IN ITALIAN VENETO SME’S.
ROFFIA, Paolo
2012-01-01
Abstract
Some studies on company performance, carried out before the 2007-2008 crisis, revealed that good corporate governance and good internal control systems lead to better results in the long term view [Bauwhede H.V., 2009], [Larker D.F., Richardson S., Tuna I., 2005]. Over the past years, companies have had to face one of the worst strong financial crises, while economic paradigms, like “too big to fail”, need to be updated or redefined. This study focuses on SMEs because of their economic relevance in the Italian context and of the limited number of studies available to these companies. Can we assume that corporate governance and internal control systems are able to determine better financial performance and SMEs reaction in times of crises? To answer this and look at other related topics from a practical point of view, a research project was defined and launched in 2010 and continued in 2011. It analyzed the Italian context, in particular the Verona and Vicenza areas, with their numerous SMEs. Using a specific questionnaire addressed to SMEs with a local subsidiary in the Verona and Vicenza provinces, companies were asked to provide data on four sections (in a sort of BSC model), believed to be important for determining their financial performance. The relevance of the variables (factors) collected was assessed using a statistical approach. By the beginning of January 2012, around 470 questionnaires had been received, from approximately 10% of the SMEs present in the geographical area considered. In this context the paper aims to analyze the relationship between variables (factors) and financial performance, in order to identify critical ones that impact companies’ results. This could help companies to gain better financial performance, prevent effects of the crisis and to adopt good business practices concerning the structure and processes of corporate governance and internal control system.
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