Impact of Corporate Governance Practices on Financial Performance of Microfinance Institutions in India

Abstract

Corporate Governance practices of MFIs (Microfinance Institutions) across different economies have been known to affect the firm performance. This study explores the practices and key board features (Audit Committees, Independent Directors, International Directors, CEO-Board Chairman duality, Board Size and Director’s Skills) that may have effect on the financial performance of ‘for profit’ MFIs in India. The study identifies Board Size and presence of International Directors to have negative impact on the profitability of MFIs while the Directors’ financial skills are found to have a positive impact on the profitability. No effect of CEO-Board Chairman dual role and audit committees was found on the MFI profitability.