Some Factors Affecting the Financial Performance of Small and Medium Enterprises (SMEs) in the Kingdom of Saudi Arabia

Abstract

The objective of this study is to determine the factors affecting the financial performance (FP) of Small and Medium Enterprises (SMEs) in the Kingdom of Saudi Arabia. Three factors have been examined including corporate governance (CG), human resource capacity (HR) and access to finance (AF). Primary data were collected using a survey by visiting offices of the SMEs and electronically. Analysis was performed using multiple regression and factor analysis. The financial performance has a correlation coefficient of 0.63 with corporate governance, 0.33 with human resource capacity and 0.3 with access to finance. The multiple regression analysis results show significant positive effect of all three determinants on the financial performance of SMEs in KSA. The R-square value shows that 43 percent of changes in the financial performance are due to the three independent variables. During factor analysis, the value of KMO is 0.69, which means that the original factors can be used as variables with a strong correlation, and the Bartlett sphericity value is 752.456 which is statistically significant. In addition, the results of factor analysis show that corporate governance is the main factor affecting the financial performance of SMEs in KSA.