1. The Influence of Executive
Incentives on the Strategy
and Performance of
Microfinance Investment
Vehicles
Pontus Engstrom, University of Agder
FIBE doctoral colloquium 2013

2. Introducing the research setting and the research
problem
Investment Microfinance
Investor
Vehicle Institution

3. Theory and how it relates to present insights
Agency theory
Asymmetric
Information
Investment
Investor Contract
Vehicle

4. Theory of the motivated agent (Besley & Ghatak, 2005)
• Incentives are also perceived intrinsic benefits such as saving lives,
defending a country or teaching students.
• True for public institutions with a sense of collective output
• True for non-profits and microfinance with dual-return (social and financial)
Mission wage differential …with mission drift

5. Conceptual framework
Risk strategy
+
Executive Performance
+
compensation Mediating variable
+
Independent variable Dependent variable
Controlling for: size, growth,
leverage, inflation and ownership

6. Hypothesizes
• Hypothesis 1: The higher the compensation, the higher the financial
performance of firms, thus showing that the principal-agency situation is
handled by aligning the interests of the principal (investor) with the agent
(management).
• Hypothesis 2: The higher the compensation, the higher the risk, thus showing
that the principal-agency situation is handled by aligning the interests of the
principal (investor) with the agent (management).
• Hypothesis 3: The higher the risk, the higher the financial performance of
firms, thus showing that the principal-agency situation is handled by aligning
the interests of the principal (investor) with the agent (management).
6

7. Plan of study – cumbersome data collection
• Data collection from annual reports
• Interviews
• Research population: ~ 100 Investment Vehicles (MIVs)
• Sample: ~ 20 MIVs
• Correlation analysis

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