The determinants of microfinance institutions’ capital structure around the world

Shettima, U 2017, The determinants of microfinance institutions’ capital structure around the world , PhD thesis, University of Salford.

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Abstract

An enduring problem facing microfinance institutions is access to funding. This study investigates the determinants of MFIs access to funding using a comprehensive measure of capital structure. The design of the study takes account three gaps in our current understanding of this topic. Firstly, despite the huge literature on MFIs corporate governance and the significant role of women on microfinance outcomes, it is perhaps surprising that no research has been conducted on the effect of board gender diversity on MFIs capital structure. Secondly, the role of standard firm-specific and institutional-specific factors in determining MFIs capital structure decision is unclear. Utilizing an alternative regression framework may provide a reliable analysis. Thirdly, our understanding of the composition of MFIs leverage is far from complete. The relationship between deposit liabilities and non-deposit liabilities have not yet been subject of investigation.

In response to these three major issues, this study employs empirical research methods using panel data analysis technique. We find that female directors have significant positive influence on deposits and subsidies. Furthermore, the study also shows evidence of risk-taking attitude among female directors when MFIs have three or more of them on board. Secondly, we find that the effect of firm-specific factors on MFIs capital structure differ across countries, while prior studies assume equal impact of these determinants. We find that institutional-specific factors significantly explain the variation of MFIs leverage across countries. However, commercially related institutional factors does not affect MFIs access to subsidies. We also show that there is an indirect impact of institutional factors, as we report their significance effect through firm-specific factors. Finally, the study provides empirical evidence that deposits and borrowings are substitutes rather than complements, and that the degree of substitutability is more pronounced in MFIs operating in a developed financial sector, where the degree of information asymmetry is lower.

Item Type: Thesis (PhD)
Schools: Schools > Salford Business School
Depositing User: U Shettima
Date Deposited: 26 Feb 2018 11:36
Last Modified: 31 Mar 2018 01:38
URI: http://usir.salford.ac.uk/id/eprint/43661

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