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The influence of CEO power on agency costs in non-profit organisations: evidence from the global microfinance industry

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  • Roy Mersland
  • Daudi Pascal
  • Leif Atle Beisland

Abstract

This paper examines agency costs incurred by microfinance organisations. We argue that differences in agency costs not only stem from differences in ownership form but are also influenced by the amount of power wielded by the chief executive officer (CEO). We proxy for agency costs using operating expenses, asset utilisation, liquidity and tangible asset intensity. Using a sample of 374 microfinance organisations located in 76 countries, we find evidence that agency costs are higher in microfinance organisations set up as non-profits, but only if the CEO is powerful. Our empirical evidence illustrates the importance of installing proper governance mechanisms to minimise agency costs, in particular in the non-profit sector.

Suggested Citation

  • Roy Mersland & Daudi Pascal & Leif Atle Beisland, 2016. "The influence of CEO power on agency costs in non-profit organisations: evidence from the global microfinance industry," Working Papers CEB 16-045, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/240515
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    More about this item

    Keywords

    CEO; NPO; agency costs; microfinance;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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