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

Roy Mersland, Daudi Pascal () and Leif Atle Beisland

No 16-045, Working Papers CEB from ULB -- Universite Libre de Bruxelles

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.

Keywords: CEO; NPO; agency costs; microfinance (search for similar items in EconPapers)
JEL-codes: D23 G21 L31 M12 (search for similar items in EconPapers)
Pages: 32 p.
Date: 2016-11-21
New Economics Papers: this item is included in nep-cfn, nep-hrm and nep-mfd
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