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Governance and Performance of Microfinance Institutions in Central And Eastern Europe and the Newly Independent States

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Author Info
Valentina Hartarska ()
Abstract

This paper presents the first evidence on the impact of external governance mechanisms, board diversity and independence, and management compensation on outreach and sustainability of microfinance institutions in Central and Eastern Europe and the Newly Independent States. Results indicate that among external governance mechanisms only auditing affects outreach, whereas regulation and rating do not affect performance. Board diversity improves both outreach and sustainability while larger and less independent boards lower sustainability. Performance-based compensation is not effective in aligning the interest of managers and stakeholders, and underpaying managers reduces outreach.

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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 2004-677.

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Length: 34 pages
Date of creation: 01 Apr 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-677

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Related research
Keywords: Central and Eastern Europe and the Newly Independent States; governance; microfinance; board of directors; managerial compensation; regulation; and rating;

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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    Other versions:
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