Corporate governance practices and its impact on the financial performance of microfinance institutions in India

Abstract

The Cadbury report (1992) has defined corporate governance as the “system by which companies are directed and controlled”. Explicitly CG is the framework in which stakeholders’ interests are to be balanced. Good governance practices have been observed as the key ingredient of microfinance institutions (MFIs) as it ventures to aid social and financial objectives. In this paper, we have examined the corporate governance practices in microfinance institutions (MFIs) and investigated the impact of corporate governance on the financial performance of the microfinance institutions (MFIs). Keyboard features are(board size, independent directors, independent audit committee) that have effects on the financial performance of the microfinance institutions of India. We have used 60 Indian companies as a sample and took 600 observations from selected companies, the time duration of the study is from 2016-2021. The audit committee has a negative impact on the performance, it doesn’t help in improving the monitoring and transparency of the firm. We found that the board size and audit committee have a significant impact on the performance, the corporate governance has a moderate impact on the financial performance of the Micro financing institutions.