Board size and diversity as governance mechanisms in community development loan funds in the USA

Valentina Hartarska () and Denis Nadolnyak

Applied Economics, 2012, vol. 44, issue 33, 4313-4329

Abstract: Community Development Loan Funds (CDLFs) in the US help revitalize low-income communities by providing financial services to underserved populations. This article uses recently available data from several surveys to explore the link between performance and board size and diversity. Given the unique nature of CDLFs, specific hypotheses are formulated based on insights from the literature on governance in banks and nonprofit institutions. To capture the CDLFs multiple objectives, the article adapts an empirical approach used to study governance in banks. The results show that efficiency improves as the board size increases up to 13 members. The results also suggest that gender diversity has a positive impact, while racial diversity is associated with a negative but negligibly small impact.

Date: 2012
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DOI: 10.1080/00036846.2011.589812

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