Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States

34 Pages Posted: 8 May 2004

See all articles by Valentina Hartarska

Valentina Hartarska

Auburn University - Department of Agricultural Economics and Rural Sociology; Auburn University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 2004

Abstract

This paper presents the first evidence on the impact of external governance mechanisms, board diversity and independence, and management compensation on outreach and sustainability of microfinance institutions in Central and Eastern Europe and the Newly Independent States. Results indicate that among external governance mechanisms only auditing affects outreach, whereas regulation and rating do not affect performance. Board diversity improves both outreach and sustainability while larger and less independent boards lower sustainability. Performance-based compensation is not effective in aligning the interest of managers and stakeholders, and underpaying managers reduces outreach.

Keywords: Central and Eastern Europe and the Newly Independent States, governance, microfinance, board of directors, managerial compensation, regulation, and rating

JEL Classification: G21, G32, L22, L31, O16, P23, Q14

Suggested Citation

Hartarska, Valentina, Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States (April 2004). Available at SSRN: https://ssrn.com/abstract=542602 or http://dx.doi.org/10.2139/ssrn.542602

Valentina Hartarska (Contact Author)

Auburn University - Department of Agricultural Economics and Rural Sociology ( email )

Comer Hall
Auburn, AL 36849
United States

Auburn University - Department of Finance ( email )

Auburn, AL 36849
United States

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