Boards in microfinance institutions: how do stakeholders matter?

Abstract

Microfinance Institutions provide financial services to poor people. Governance of these organizations is important so that they can operate efficiently and sustainably. This study analyzes the influence of stakeholders (donors, employees, customers, and creditors), on board structure (board size and CEO duality), and on organizational performance. We use a global data set of 379 microfinance institutions from 73 countries, collected from rating organizations. Supported by stakeholder theory, agency theory and resource dependence theory, we find stakeholders to be important and have various influences on microfinance institutions. We find donors to be associated with small boards, non-duality and better performance. Employees are associated with large boards, while customers are associated with duality and good financial performance. Creditors opt for duality and better social performance. Implications and areas for future research are discussed.

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“…In terms of the enterprise's age, panel A shows a positive relationship between the enterprise's age and the number of employees. This is in line with Mori and Mersland (2014), who suggest that an enterprise's age matters for organizational growth. The results for ownership status suggest that sole proprietorship is negatively associated with YOEs' performance.…”

The Association between microfinance rating scores and corporate governance: a global survey

“…Prior corporate governance research on listed firms suggests that international corporate influence, such as international directors or foreign listing, is associated with stronger governance mechanisms and may directly enhance firm performance (Ben Naceur, Ghazouani, & Omran, 2007;Oxelheim & Randøy, 2003). Likewise, Mori and Mersland (2014) argue that donor representatives (who in most cases are international ) on MFI boards may have a positive effect on performance.…”

On The Two-Way Relationship between Corporate Reputation and Financial Performance in Microfinance: A Stakeholder Approach

“…Their findings show that non-financial stakeholder relationship with the firm has a high and positive effect on firms faced by financial performance challenge rather than on the sustained and superior financial outcome of consolidating business. In the microfinance area, Mori & Mersland (2014) found that a presence of stakeholders on the board of an MFI has a better effect on MFI social and financial performance.…”