The origin of CEOs and its influence on microfinance performance and risk-taking

Daudi Pascal (), Leif Atle Beisland and Roy Mersland

No 16-046, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: This study examines the relationships between the origin of chief executive officers (CEOs), and the performance and risk-taking levels of their companies. It is based on a sample of 353 microfinance institutions (MFIs) from 76 countries, with data covering the period 1996-2011. We use return on assets and operational costs as performance metrics, and the standard deviation of return on assets and operational costs as measures of risk. The results suggest that MFIs with an internally-recruited CEO achieve a significantly higher performance than MFIs with an externally-recruited CEO. More specifically, MFIs with an ‘insider CEO’ have a positive association with return on assets, but a negative association with operational costs. Moreover, internally-recruited CEOs appear to be associated with a lower level of risk. We believe that these results are important and have clear policy implications, in particular for an industry with such a thin labour market for CEOs and lack of managerial capacity. Our findings are consistent with the view that insider CEOs have firm-specific skills, experience and network resources that result in an enhanced MFIs performance and low-risk.

Keywords: CEO; microfinance; performance; risk (search for similar items in EconPapers)
JEL-codes: G21 G32 M12 (search for similar items in EconPapers)
Pages: 34 p.
Date: 2016-11-21
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-eff and nep-mfd
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