Purpose This study aims to examine the moderating influence of corporate governance (CG) variables, particularly board attributes, on the association between bank credit and the performance of small and medium-sized enterprises (SMEs). Design/methodology/approach Using panel data from 302 Indian manufacturing SMEs over a 10-year period, the analysis applies a two-step generalised method of moments estimator to assess the moderation effects. Findings Results indicate that board size (BS), board independence (BIND), chief executive officer duality (CEOD), and board gender diversity (BGD) significantly shape the relationship between long-term bank credit (LTBC) and firm performance (FP). In the case of short-term bank credit (STBC), BS and BGD were found to weaken the positive association with performance. Research limitations/implications By focusing on an emerging economy context, this study provides deeper insight into how governance mechanisms interact with debt financing to influence organisational outcomes. The findings contribute to theory by linking CG, financial decision-making and FP within the SME sector. Practical implications SMEs that use LTBC may benefit from leaner board structures, lower independence and more unified leadership, which can facilitate timely strategic decisions and enhance FP. In contrast, SMEs that are dependent on STBC should prioritise stronger internal controls, separation of powers and disciplined oversight to ensure prudent fund utilisation and maintain financial stability. Originality/value Based on the authors’ investigation, no prior study has explored the moderating role of CG variables in the bank credit–FP nexus, with a focus on SMEs in an emerging market. It extends the literature on debt financing and governance by offering context-specific insights from India.
Seet et al. (2026) studied this question.