The role of judicial efficiency in the board size-financial performance nexus: Evidence from microfinance institutions

Abstract

The exact effect of board size on financial performance has remained inconclusive in the empirical literature. We seek to contribute to this literature by assessing the impact of board size on the financial performance of 408 microfinance institutions (MFIs) for 2010 to 2018 financial years. Besides, we explore whether judicial efficiency exerts any significant effect on the board size-performance nexus. Using the System Generalized Method of Moments estimator as the main analytical technique, we observe that board size has a strong negative effect on the financial performance of MFIs in both the short and long run. In addition, the results show that MFIs that operate in an environment where the judicial system is efficient are likely to experience the positive impact of board size on their financial performance.