Corporate Governance Practices and Financial Performance of SMEs in MENA Region: Evidence from Panel Data Analysis

Abstract

The study's objective is to examine the impact of the corporate governance on the financial performance of the SME sector in MENA region during 2012-2024. The study draws on panel data of a number of MENA countries to construct the Corporate Governance Index (CGI), made up of four sub-indices: board structure, ownership concentration, audit mechanisms, and disclosure quality. The financial performance of SMEs is measured by Return on Assets (ROA) and the control variables are firm size, firm age, leverage, growth opportunities and macro-economic conditions. The method used is the empirical approach, which consists of pooled OLS, fixed effects, random effects, robustness check using quantile regression and specification test using Hausman test. The findings always show that there is a positive and statistically significant relationship between corporate governance and SME's financial performance in all baseline models. The results of the fixed effects estimation suggest that governance improvements lead to within-firm performance benefits over time and results are robust to the specification for the random effects estimation. The quantile regression results also suggest the heterogeneous effects, in the sense that the effect of governance is more in high-performing SMEs than in low-performing. The outputs indicate that generally corporate governance has a significant role on the financial performance of SMEs in the MENA region and its effectiveness depends on the performance of the firm. The study adds to the literature by offering solid empirical evidence on the ground from an under-researched regional context and policy insights for strengthening governance practices to boost SME sustainability and growth.

Received: 2026-04-15 | Revised: 2026-06-24 | Accepted: 2026-08-03 | Published: 2026-08-13

Declarations

Competing interests: The authors declare no competing interests.

Data availability statement: Data will be made available on reasonable request from the corresponding author.

Funding: This research received no external funding.

Clinical Trial Number: Not Applicable.

Declaration of using generative AI: During the preparation of this work the author(s) used ChatGPT in order to correct the grammatical errors. After using this tool/service, the author(s) reviewed and edited the content as needed and take full responsibility for the content of the published article.

Author Contributions: M.B.: Conceptualization, methodology, writing—original draft preparation, writing—review and editing. All authors have read and agreed to the published version of the manuscript.