Do Powerful CEOs Have an Impact on Microfinance Performance?

32 Pages Posted: 2 Aug 2009

See all articles by Rients Galema

Rients Galema

Utrecht University - School of Economics

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance; Wageningen UR - Development Economics Group

Roy Mersland

University of Agder

Date Written: July 31, 2009

Abstract

In this study we show that Microfinance Institutions (MFIs) with more powerful CEOs have higher performance variability. A powerful CEO is defined as one that also chairs the board of directors. CEO power is reflected in higher performance variability if CEOs have more latitude of action, i.e. managerial discretion. Managerial discretion can be limited by having stakeholder electives on the board. We find that CEO power only has an effect on MFI performance variability when there are no stakeholder electives on the board. Furthermore, we argue that CEOs in non-profit MFIs have more discretion, because their dual mission implies their CEOs are harder to control. We find that CEO power increases performance variability of non-profit MFI’s, while it has no effect for other MFI types.

Keywords: microfinance, corporate governance

JEL Classification: G3

Suggested Citation

Galema, Rients and Lensink, Robert and Mersland, Roy, Do Powerful CEOs Have an Impact on Microfinance Performance? (July 31, 2009). Available at SSRN: https://ssrn.com/abstract=1441985 or http://dx.doi.org/10.2139/ssrn.1441985

Rients Galema (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

Robert Lensink

University of Groningen - Department of Economics, Econometrics and Finance ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Wageningen UR - Development Economics Group ( email )

Hollandseweg 1
WAGENINGEN, 6706 KN
Netherlands

Roy Mersland

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

HOME PAGE: http://www.uia.no/microfinance

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