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

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  • Valentina Hartarska

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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.

Suggested Citation

  • Valentina Hartarska, 2004. "Governance and Performance of Microfinance Institutions in Central And Eastern Europe and the Newly Independent States," William Davidson Institute Working Papers Series 2004-677, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2004-677
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40063/2/wp677.pdf
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    References listed on IDEAS

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    2. repec:hrv:faseco:30728046 is not listed on IDEAS
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    Cited by:

    1. Thapa, Ganesh, 1. "Sustainability and Governance of Microfinance Institutions: Recent Experiences and Some Lessons for Southeast Asia," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 3(1).

    More about this item

    Keywords

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

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • 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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