Best Corporate Governance Practices Regarding Financial Disclosures Recommended for Russian Small and Medium Enterprises (SMEs)

Abstract

Recently SMEs have been affecting the Gross Domestic Product (GDP) of European, American and Russian markets. However, European and American SMEs were developing in favorable conditions with financial support from the European and American Governments respectively and strict legislation on shareholders’ rights and reporting in comparison with Russian SMEs. The principles of corporate governance, regulating SMEs’ operations in Russia, were introduced short while ago, while their implementation was not taken yet into consideration by the Russian Government and SMEs’ shareholders. Therefore, the objective of this research was to expand the existing knowledge on corporate governance practices, in particular, for SMEs operating in the Russian environment. At the same time, to accomplish the objective, it was essential to identify the most appropriate corporate governance practices on reporting of the commercial information and its transparency. Furthermore, the associated advantages and constrains related to implementation of these practices were investigated. This research was conducted using the qualitative method. Whereas the objective suggested describing the actual standards in terms of corporate governance and explaining its importance, the explanatory case study was chosen as the strategy to carry out the study. The analysis of the secondary data was executed with the help of data display and analysis method. Implementation of semi-structured interviews contributed to validity of the findings. The most appropriate corporate governance practices about reporting on finances and its transparency for Russian SMEs were determined as the ones, established by the OECD. Applying those regulating principles were useful for the raise in the financial liquidity of Russian SMEs, simplifying the access to investment and building the reputation. Notwithstanding the issues, related to the current legislation and investment climate, implementation of the best practices was dependent to a great extent on the Russian Government’s initiatives.