Corporate Governance Characteristics And Its Effect On The Performance Of Microfinance Institutions In Ghana

Background: The study aimed at assessing the effect of some selected corporate governance characteristics on the performance of microfinance companies in Ghana. The corporate governance characteristics were CEO duality, board size, and board composition. Tobin’s Q and Return on Assets were used as proxy for firm performance. To assess whether there are other factors apart from the above that affect profitability, firm characteristics such as firm size, fixed asset over total assets and debt structure were also used as control variables. Materials and Methods: The descriptive and the GLS panel regression analysis were used to analyse the data of 25 microfinance companies spanning from 2005 to 2016 in Ghana. Results: We realized that, board size had a positive impact on ROA but it had a negative impact on Tobin’s Q. The study found a negative impact of CEO duality on Tobin’s Q and a positive impact on ROA. For board composition, the study found that there was a negative and significant impact of board composition on ROA and a positive impact on Tobin’s Q. Furthermore, firm size had a negative and significant impact on ROA. It had the same negative impact on Tobin’s Q though not significant. Asset structure had a significant positive impact on ROA but impacting Tobin’s Q negatively. On the other hand, there was also a positive impact of debt structure on ROA while impacting Tobin’s Q negatively. Conclusion: It was recommended that MFIs should be encouraged to improve all corporate governance directives in order to improve and sustain the industry