Governance and scope economies in microfinance institutions

Valentina Hartarska, Roy Mersland, Denis Nadolnyak and Christopher Parmeter
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Roy Mersland: UIA - University of Agder

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Abstract: This paper explores the relation between board size and composition and estimated cost SCOPE? economies from offering both voluntary savings and loans by Microfinance Institutions. In the first stage, we estimate scope economies from a cross-country sample using a semiparametric smooth coefficient method. It uniquely permits us to include observations with zero savings output and thus include all MFIs in the sample since the majority are lending-only. More importantly, this methodology allows us to incorporate the impact of direct and indirect (via input price interactions) factors related to the external environment in which MFIs operate, and which are not controlled by management. In the second stage, we study differences in estimated scope economies that are can be attributed to management and thus differ by various governance structures.We find some support for the hypotheses that internally generated information, due to employee representation on MFI boards, may increase the likelihood and magnitude of scope economies. However, the CEO-Chairman duality is associated with equal and even slightly larger probability of negative scope economies, a result consistent with previous work. A complementary finding is that representation by other types of stakeholders such as clients, international directors, and creditors, as well as gender and international diversity, are not

Keywords: O16; L25; Intermediation JEL code: G21; Microfinance Institutions Governance Board of directors Board size Board Composition Group Cohesion Scope Economies Intermediation JEL code: G21 G3 O16 L31 L25; Governance; Board of directors; Board size; Board Composition; Group Cohesion; Scope Economies; Intermediation G21; G3; L31; Microfinance Institutions; does not reflect contribution; January 6 th; 2011; Microfinance Institutions Governance Board of directors Board size Board Composition Group Cohesion Scope Economies Intermediation G21 G3 O16 L31 L25 * author order is alphabetic does not reflect contribution January 6 th 2011; L25 * author order is alphabetic (search for similar items in EconPapers)
Date: 2013
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Published in International Journal of Corporate Governance, 2013, 4 (1), pp.74. ⟨10.1504/IJCG.2013.055174⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05220860

DOI: 10.1504/IJCG.2013.055174

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