IDEAS home Printed from https://ideas.repec.org/a/spr/decisn/v46y2019i1d10.1007_s40622-018-0199-3.html
   My bibliography  Save this article

Do regulations and governance quality impact performance of MFIs in India?

Author

Listed:
  • K. P. Saraswathy Amma

    (FISAT Business School)

  • Gopalakrishnan Kannan

    (Bharathiar University)

  • Lakshmi Parthasarathy

    (Indian Institute of Technology Madras)

Abstract

We explore the relationship between performance, regulations and governance quality of Microfinance Institutions (MFIs) through a survey conducted among CxOs and board of directors of top 55 MFIs in India. We study the effect of AP ordinance (2010) (taken as a proxy for regulation), boardroom conflicts (taken as a proxy for governance quality) and the recent demonetization policy of Government of India on the performance of the MFIs in India. The results show that AP ordinance and boardroom conflicts have had a negative impact on the performance of the MFIs. As per public interest theory, regulations are good for correcting market failures and upgrading the existing practices and hence have a positive impact on the performance. However, our research proves that AP ordinance has a negative impact on the performance of the firm and hence does not support the theory in the Indian context. Diversity and experience in the board could lead to conflicts and delayed decision making, having a negative impact on the performance of the firm. Our research survey confirms this theory. Managers’ powers are limited by the external environment, and the state has more powers to set the field. However, our empirical model does not support the negative impact of demonetization on the performance of MFIs. There is a dearth of study on Indian MFI industry, and this paper contributes to narrow that gap.

Suggested Citation

  • K. P. Saraswathy Amma & Gopalakrishnan Kannan & Lakshmi Parthasarathy, 2019. "Do regulations and governance quality impact performance of MFIs in India?," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(1), pages 3-14, March.
  • Handle: RePEc:spr:decisn:v:46:y:2019:i:1:d:10.1007_s40622-018-0199-3
    DOI: 10.1007/s40622-018-0199-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40622-018-0199-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s40622-018-0199-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cecilia NAVARRA & Elena VALLINO, 2015. "Who Had the Idea to Build Up a Village Organization? Some Evidence from Senegal and Burkina Faso," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(1), pages 33-72, March.
    2. Paul L. Joskow & Roger G. Noll, 1981. "Regulation in Theory and Practice: An Overview," NBER Chapters, in: Studies in Public Regulation, pages 1-78, National Bureau of Economic Research, Inc.
    3. Beatriz Armendáriz & Jonathan Morduch, 2010. "The Economics of Microfinance, Second Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262014106, December.
    4. Federica VIGANO & Andrea SALUSTRI, 2015. "Matching profit and Non-profit Needs: How NPOs and Cooperative Contribute to Growth in Time of Crisis. A Quantitative Approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(1), pages 157-178, March.
    5. Olsen, Tricia D., 2017. "Political Stakeholder Theory: The State, Legitimacy, and the Ethics of Microfinance in Emerging Economies," Business Ethics Quarterly, Cambridge University Press, vol. 27(1), pages 71-98, January.
    6. William B. Stevenson & Robert F. Radin, 2009. "Social Capital and Social Influence on the Board of Directors," Journal of Management Studies, Wiley Blackwell, vol. 46(1), pages 16-44, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Md. Ali Rasel & Sandar Win, 2020. "Microfinance governance: a systematic review and future research directions," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(7), pages 1811-1847, April.
    2. Saswat Barpanda & Susmita Mukhopadhyay, 2020. "Does firmography patterns human resource practice? evidence from microfinance industry of India," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 10(1), pages 24-39, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Niels Hermes & Marek Hudon, 2018. "Determinants Of The Performance Of Microfinance Institutions: A Systematic Review," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1483-1513, December.
    2. Kibrom A. ABAY & Bethelhem KORU & Gashaw Tadesse ABATE & Guush BERHANE, 2019. "How Should Rural Financial Cooperatives Be Best Organized? Evidence From Ethiopia," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 187-215, March.
    3. Gupta, Aparna & Owusu, Abena & Zou, Lei, 2021. "Identifying board of director network influence for firm characteristics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 581(C).
    4. Hermes, Cornelis & Hudon, M., 2018. "Determinants of the Performance of Microfinance Institutions: A Systematic Review," Research Report 2018008, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. Burger Ronelle & Owens Trudy & Prakash Aseem, 2018. "Global Non-Profit Chains and the Challenges of Development Aid Contracting," Nonprofit Policy Forum, De Gruyter, vol. 9(4), pages 1-12, December.
    6. Fałkowski, Jan & Kurek, Przemysław J., 2024. "Religious symbols in the public sphere and development of the third sector: Some evidence from rural Poland," Journal of Comparative Economics, Elsevier, vol. 52(2), pages 495-508.
    7. Giuseppe Terzo & Giuseppe Notarstefano & Umberto Di Maggio, 2024. "Strengthening local economies through social capital: The role of cooperative firms in driving economic growth in Italy," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(3), pages 863-882, September.
    8. repec:ehu:cuader:69659 is not listed on IDEAS
    9. Ronelle Burger & Indraneel Dasgupta & Trudy Owens, 2015. "A Model of Nongovernmental Organization Regulation with an Application to Uganda," Economic Development and Cultural Change, University of Chicago Press, vol. 64(1), pages 71-111.
    10. Firas Farhan Jedi & Sabri Nayan, 2018. "An empirical evidence on the effect of women board representation on firm performance of companies listed in Iraq Stock Exchange," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(1), pages 117-131, January.
    11. Gani ALDASHEV & Cecilia NAVARRA, 2018. "Development Ngos: Basic Facts," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 125-155, March.
    12. Carlo Borzaga & Manlio Calzaroni & Chiara Carini & Massimo Lori, 2019. "Structure and Performance of Italian Cooperatives: A Quantitative Analysis Based on Combined Use of Official Data," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 8(1), pages 65-83.
    13. Xiao-Min Yu & Ke Chen & Jin-Tong Liu, 2022. "Exploring How Organizational Capabilities Contribute to the Performance of Social Enterprises: Insights from China," Sustainability, MDPI, vol. 14(7), pages 1-20, April.
    14. Giuseppe Terzo, 2021. "Social capital, social economy and economic resilience of Italian provinces," Papers in Regional Science, Wiley Blackwell, vol. 100(5), pages 1113-1135, October.
    15. Giuseppe Terzo, 2022. "Investigating the link between social cooperation sector and economic well‐being of Italian provinces through the lens of social capital," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1041-1062, December.
    16. Md. Ali Rasel & Sandar Win, 2020. "Microfinance governance: a systematic review and future research directions," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 47(7), pages 1811-1847, April.
    17. Müller, Malte, 2020. "Leadership in agricultural machinery circles: experimental evidence from Tajikistan," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(2), April.
    18. Simona Monteleone & Francesco Reito, 2018. "Cooperative firms in hard times," Small Business Economics, Springer, vol. 51(1), pages 171-179, June.
    19. Giuseppe Terzo, 2022. "The economic impact of social entrepreneurship: an exploratory analysis of the linkage between social cooperation and local growth in Italy," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 76(3), pages 17-28, July-Sept.
    20. Marcos Carchano & Inmaculada Carrasco & Ángela González, 2024. "Eco‐innovation and environmental performance: Insights from Spanish wine companies," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(2), pages 595-623, June.
    21. Perez, Marybel & von Schnurbein, Georg & Gehringer, Theresa, 2022. "Mitigating health policy fragmentation through interlocks. The networks between American and Swiss public-private partnerships," Health Policy, Elsevier, vol. 126(11), pages 1163-1172.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:decisn:v:46:y:2019:i:1:d:10.1007_s40622-018-0199-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.