Corporate governance plays a vital role in determining the performance of the organization since there are issues in financial distress over the world. Board of directors is the heart of an organization. They need to be effective enough in addressing the decision making. Wrong decision made resulted in financial problems and corporate collapse such as Enron, WorldCom and HIH Insurance. Most of the Malaysian SMEs failed to follow the corporate governance rules. Due to this imbalance, many SMEs are involved in different sort of fraudulent activities, such as lodgement of false and misleading particulars, illegal deposit taking, and illegal investment schemes. Among corporate governance mechanism, board of directors received much attention in the business community and also in the media, particularly in board size and board composition. Thus, this research has been conducted to examine the relationship between board size and board composition towards the firm performance of SMEs. A set of questionnaire was distributed to the 313 SMEs firm located in Selangor area which is in service sector. The finding of the study has revealed that there were high levels of performance of SMEs in Selangor when looking at employment growth and sales growth. Other than that, the independent variables which consist of board size and board composition were positively correlated with dependent variable which is the firm performance. Furthermore, this study also found that female representative was the main factor that influences the firm performance of SMEs. Thus, this study was confirmed that female director has contributed to the better performance of SMEs. Researcher found that the findings of this study and the recommendation provided would contribute to the research area.
