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Board characteristics and microfinance institutions’ performance

Board characteristics and microfinance institutions’ performance The purpose of this paper is to examine the effect of board characteristics on MFIs performance in Nigeria. A specific country study is warranted given the results from pooled cross-country studies may be biased owing to a failure to control for country differences. It is also particularly challenging to generalize the outcome of these results into a specific country given that many factors about MFIs, ranging from the nature of governance, legal status, size and prudential regulations, are not similar across countries.Design/methodology/approachThe relationship between board characteristics and microfinance banks performance in Nigeria is tested using a sample of 120 firm-year observations covering 30 MFIs in the periods from 2010 to 2013. The study extracted all microfinance-level data from the Microfinance Information Exchange database.FindingsThe authors document a positive and significant relationship between board size and MFIs performance. The authors also find negative relation between female directors and MFIs performance, but not significant. The results suggest that larger board size indicates good corporate governance practice, which leads to reduced agency cost.Research limitations/implicationsThis study sheds new lights on the Nigerian MFIs’ board room dynamic. As the government is increasingly contemplating on the board structure and corporate governance policies, the study offers useful and timely empirical guidance to the Nigerian regulators.Originality/valueGiven the important role of microfinance industry in Nigeria, this is the first study of its kind analyzing the impact of board characteristics on microfinance performance among Nigerian MFIs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting in Emerging Economies Emerald Publishing

Board characteristics and microfinance institutions’ performance

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2042-1168
DOI
10.1108/jaee-01-2017-0006
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to examine the effect of board characteristics on MFIs performance in Nigeria. A specific country study is warranted given the results from pooled cross-country studies may be biased owing to a failure to control for country differences. It is also particularly challenging to generalize the outcome of these results into a specific country given that many factors about MFIs, ranging from the nature of governance, legal status, size and prudential regulations, are not similar across countries.Design/methodology/approachThe relationship between board characteristics and microfinance banks performance in Nigeria is tested using a sample of 120 firm-year observations covering 30 MFIs in the periods from 2010 to 2013. The study extracted all microfinance-level data from the Microfinance Information Exchange database.FindingsThe authors document a positive and significant relationship between board size and MFIs performance. The authors also find negative relation between female directors and MFIs performance, but not significant. The results suggest that larger board size indicates good corporate governance practice, which leads to reduced agency cost.Research limitations/implicationsThis study sheds new lights on the Nigerian MFIs’ board room dynamic. As the government is increasingly contemplating on the board structure and corporate governance policies, the study offers useful and timely empirical guidance to the Nigerian regulators.Originality/valueGiven the important role of microfinance industry in Nigeria, this is the first study of its kind analyzing the impact of board characteristics on microfinance performance among Nigerian MFIs.

Journal

Journal of Accounting in Emerging EconomiesEmerald Publishing

Published: Aug 3, 2018

Keywords: Microfinance; Nigeria; Corporate governance; Panel data analysis

References