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Board size and diversity as governance mechanisms in community development loan funds in the USA

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  • Valentina Hartarska
  • Denis Nadolnyak

Abstract

Community Development Loan Funds (CDLFs) in the US help revitalize low-income communities by providing financial services to underserved populations. This article uses recently available data from several surveys to explore the link between performance and board size and diversity. Given the unique nature of CDLFs, specific hypotheses are formulated based on insights from the literature on governance in banks and nonprofit institutions. To capture the CDLFs multiple objectives, the article adapts an empirical approach used to study governance in banks. The results show that efficiency improves as the board size increases up to 13 members. The results also suggest that gender diversity has a positive impact, while racial diversity is associated with a negative but negligibly small impact.

Suggested Citation

  • Valentina Hartarska & Denis Nadolnyak, 2012. "Board size and diversity as governance mechanisms in community development loan funds in the USA," Applied Economics, Taylor & Francis Journals, vol. 44(33), pages 4313-4329, November.
    • Handle: RePEc:taf:applec:44:y:2012:i:33:p:4313-4329
    DOI: 10.1080/00036846.2011.589812
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    References listed on IDEAS

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    1. Mohamed Belkhir, 2009. "Board of directors' size and performance in the banking industry," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 5(2), pages 201-221, April.
    2. Timothy Bates, 2000. "Financing the Development of Urban Minority Communities: Lessons of History," Economic Development Quarterly, , vol. 14(3), pages 227-242, August.
    3. Mark J. Flannery & Katherine A. Samolyk, 2005. "Payday lending: do the costs justify the price?," Proceedings 949, Federal Reserve Bank of Chicago.
    4. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, vol. 94(2), pages 291-309, November.
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    Cited by:

    1. Valentina Hartarska & Denis Nadolnyak & Roy Mersland, 2014. "Are Women Better Bankers to the Poor? Evidence from Rural Microfinance Institutions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1291-1306.
    2. Mareva Sabatier, 2015. "A women's boom in the boardroom: effects on performance?," Applied Economics, Taylor & Francis Journals, vol. 47(26), pages 2717-2727, June.
    3. Md Aslam Mia & Lucia Dalla Pellegrina & Wai‐Yan Wong & Sunil Sangwan, 2024. "Gender pay gap in the microfinance industry: A global perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(3), pages 835-862, September.
    4. Reinert, Regina M. & Weigert, Florian & Winnefeld, Christoph H., 2015. "Does Female Management Influence Firm Performance? Evidence from Luxembourg Banks," Working Papers on Finance 1501, University of St. Gallen, School of Finance.
    5. Anne Marie Ward & John Forker, 2017. "Financial Management Effectiveness and Board Gender Diversity in Member-Governed, Community Financial Institutions," Journal of Business Ethics, Springer, vol. 141(2), pages 351-366, March.
    6. Beatrice Sarpong‐Danquah & Michael Adusei & Joseph Magnus Frimpong, 2023. "Effect of board gender diversity on the financial performance of microfinance institutions: Does judicial efficiency matter?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(2), pages 495-518, June.
    7. Irvin Renee & Sokolowski Jes, 2020. "Think Tank Soldiers in the Battle for Tax Reform," Nonprofit Policy Forum, De Gruyter, vol. 11(1), pages 1-14, January.
    8. Regina M. Reinert & Florian Weigert & Christoph H. Winnefeld, 2016. "Does female management influence firm performance? Evidence from Luxembourg banks," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(2), pages 113-136, May.
    9. Melaku Abegaz & Sajal Lahiri, 2021. "Efficiency Spillovers From Foreign Direct Investment and Domestic‐exporting Firms: The Case of Ethiopian Manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(1), pages 151-170, January.

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