nep-cfn New Economics Papers
on Corporate Finance
Issue of 2010‒02‒27
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Issues in Subsidies and Sustainability of Microfinance: An Empirical Investigation By Ahmad Nawaz
  2. Corporate Risk Management and Dividend Signaling Theory By Georges Dionne; Karima Ouederni

  1. By: Ahmad Nawaz (Pakistan Institute of Development Economics.)
    Abstract: The social nature of Microfinance Institutions (MFIs) is mainly financed by subsidies received from the donors. This paper investigates the relationship between the sustainability and the efficiency of microfinance. Using Yaron’s Subsidy Dependence Index (SDI) as a measure of sustainability, a panel data set has been generated from the audit reports of the 179 MFIs worldwide. This essay empirically investigates some important relationships and phenomenons in microfinance. Even after correcting for the endogeneity bias, the results lend some support to the existence of mission drift tendency in microfinance. Notwithstanding interest rate policy, evidence is found that MFIs do charge higher interest rate to women borrowers with small loan sizes. Further, the determinants of MFIs profitability and sustainability have also been identified. Furthermore the evidence does not support the trade-off between outreach and sustainability, however, the trade-off between costs and sustainability of MFIs is well supported. While the productivity and efficiency of MFIs contributes towards sustainability.
    Keywords: Microfinance, Sustainability, Profitability, Mission Drift
    JEL: G21 H2 G28 O57
    Date: 2010–02
  2. By: Georges Dionne; Karima Ouederni
    Abstract: This paper investigates the effect of corporate risk management on dividend policy. We extend the signaling framework of Bhattacharya (1979) by including the possibility of hedging the future cash flow. We find that the higher the hedging level, the lower the incremental dividend. This result is in line with the purpoted positive relation between information asymmetry and dividend policy (e.g., Miller and Rock, 1985) and the assertion that risk management alleviates the information asymmetry problem (e.g., DaDalt et al., 2002). Our theoretical model has testable implications.
    Keywords: Signaling theory, Dividend policy, Risk management policy, Corporate hedging, Information asymmetry
    JEL: G35 G32 D82
    Date: 2010

This nep-cfn issue is ©2010 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.