Microeconomic Foundations of Corporate Governance and Small and Medium Enterprises Performance: Evidence from Central Asia

This article explores the microeconomic foundations connecting corporate governance mechanisms to the operational performance of small and medium-sized enterprises (SMEs) in Central Asia. Most corporate governance research focuses heavily on large public corporations. As a result, small enterprises in transition economies are often misunderstood-they are forced to adopt rigid, big-company compliance rules rather than practical, scaled-down tools that solve their real-world contracting problems. Using reliable data from the World Bank Enterprise Surveys, this study examines how both internal firm governance and external regional challenges shape SME growth across Central Asia. The findings reveal that internal governance quality, specifically financial disclosure proxying by external audits, exerts a positive and statistically significant impact on SME performance. By integrating microeconomic theories of corporate governance with evidence on the regional business environment, this study aims to contribute a context-sensitive analytical framework for examining SME performance in emerging economies. The proposed framework may also inform policy discussions on strengthening business institutions, improving access to finance, and supporting sustainable SME development in Central Asia.