Capital structure and CEO tenure in microfinance institutions

• Author: Roy Mersland,Leif Atle Beisland,Daudi Pascal Ndaki1
• Date: 01 July 2018
• Published date: 01 July 2018
• DOI: http://doi.org/10.1002/jsc.2205

RESEARCH ARTICLE

DOI: 10.1002/jsc.2205

Strategic Change. 2018;27(4):329–337. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 329

Abstract

$here is a rosiঞe associaঞon between O tenure and the debt rrororঞon o= microCnance in-

sঞtuঞons. icroCnance insঞtuঞons need imrroed access to debt carital to coer a hu]e and in-

creasin] world demand =or microCnance serices. ore ererienced Os may be more ali]ned

with the microCnance insঞtuঞonĽs mission, and they may hae a beer understandin] o= the

business model o= microCnance. oreoer, carital rroiders may retuire a rroen trach record

within the insঞtuঞon to surrly =undin].

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While much research e@orts hae been rut into understandin]

whether roor reorle beneCt =rom accessin] Cnancial serices, less

is hnown about the mana]ement and CnanceŌand the interacঞon

o= the twoŌo= microCnance insঞtuঞons (Is). $his is un=ortunate

because the mana]ement o= Is will a@ect carital aailability =or

the microbanhin] industry, and the carital aailability rotenঞally has

considerable and direct inYuence on the industryĽs customer imract

($chui]oua, Durrieu, & ouao, 2017). $he lile I-mana]ement

research aailable Cnds eidence o= a si]niCcant chie= eecuঞe oLcer

(O) inYuence on I rer=ormance (alema, Lensinh, & ersland,

2012; !andpy, Strpm, & ersland, 2015). $his arঞcle aims at mahin]

a contribuঞon in this Celd as it studies the relaঞonshir between O

tenure and the IĽs carital structure.

lthou]h this issue has been studied in other contets o= nonC-

nancial Crms (e.]., John & Lito, 2010) and tradiঞonal banhs (e.]., +eh,

2011), it is o= rarঞcular releance to microCnance because increased

leera]e and tarrin] into carital marhets is considered necessary to

coer a hu]e and increasin] world demand =or microCnance serices

(Led]erwood, arne, & elson, 2013). $here=ore, it is rossible to ar]ue

that in many ways the most success=ul I O is the one that can

aract the most debt rossible to the or]aniaঞon under his/her man-

a]ement. $his study is =urther a direct resronse to the call =or research

issued by, =or eamrle, $chui]oua (2015) retuesঞn] more hnowled]e

on how mana]ers inYuence IsĽ carital structure.

$he seমn] =or this study is di@erent =rom rreious research set-

ঞn]s studyin] the mana]erial inYuence on a CrmĽs carital structure.

Is are or]aniaঞons that rroide small loans and other Cnancial

serices to economically roor =amilies to surrort their entrerreneurial

acঞiঞes (ruhn, arrena, & ,ia, 2012; arne & Sherh, 2013). ail-

ability o= credit moঞates economically roor rersons to seeh out and

idenঞ=y business orrortuniঞes within their economic system (ruhn

et al., 2012; ilana & shta, 2012). In this way, access to Cnancial ser-

ices is reco]nied as a tool to C]ht roerty (rmendari & orduch,

2010; shta, 2012). Is are there=ore considered to be ľsocial enter-

rrisesĿ or ľhybrid or]aniaঞons,Ŀ that is, Crms with both social and

Cnancial objecঞes (shta & udon, 2012; aমlana & Dorado, 2010).

$he demand =or microcredit is hu]e and on aera]e Is hae

rerorted ]rowth rates o= more than 30ѷ durin] most o= the years oer

the last courle o= decades, which is around three ঞmes that o= West-

ern banhs (ersland & Strpm, 2012). onঞnued hi]h ]rowth is lihely

as seeral marhet orrortuniঞes =or Is remain untarred (!andpy

et al., 2015). urthermore, hu]e rorulaঞons sঞll hae no access to

banhin] serices in their nei]hborhoods (De oher, 2013).

onঞnued microCnance ]rowth derends not only on customer

demand but also on IsĽ access to =undin]. In the 1970s and 1980s,

Is orerated as social or]aniaঞons. $hey rroided banhin] serices

to the roorest =amilies who tradiঞonal commercial banhs considered

too rishy clients (arne & Sherh, 2013; ilana & shta, 2012). $he

loans were Cnanced rrimarily with donaঞons rroided by ]ener-

ous rhilanthrorist and deelorment a]encies (hosh & (an $assel,

2011). Donors were moঞated by the rossibility o= roerty alleia-

ঞon throu]h the rroision o= small loans to low-income =amilies

arbtaѴ strctr; am7  t;mr; bm lbcroCmamc;

bmsঞtঞomsŖ

a7b ascaѴ 7ahb1,2Պ|Պ;b= AtѴ; ;bsѴam73Պ|Պ!o ;rsѴam71

1 School o= usiness and Law, &niersity o=

]der, risঞansand, orway

2 School o= usiness, umbe &niersity,

oro]oro, $anania

3 School o= usiness and Law, &niersity o=

]der, orway

orr;srom7;mc;

Lei= tle eisland, School o= usiness and

Law, &niersity o= ]der, Serice o 422,

4ѵ04 risঞansand, orway.

mail: lei=.a.beislandŠuia.no

* J..L. classiCcaঞon codes: 21, 32, 12

Strategic Change. 2018;27(4):329–337. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 329