Does Board Chair Characteristics Enhance the Quality of Financial Reporting of Microfinance Institutions in an Unstable Environment?

Abstract

Background: The board committee is responsible for overseeing the institution's financial reporting process and ensuring that it complies with relevant regulations and standards. In the Northwest region of Cameroon, financial reporting quality in micro financial institutions are impacted by several financial institutional yardsticks such as board size, gender diversity, board terms remuneration and financial expertise among others. Aims: This study investigates the effect of board chair characteristics specifically independence, financial expertise, and duration of service on the financial reporting quality of microfinance institutions (MFIs) in the Northwest region of Cameroon. It further explores how these governance mechanisms function within a socio-politically unstable environment. Study Design: The study employed a quantitative research design. Place and Duration of Study: The research was conducted in the Northwest Region of Cameroon. Data collection and the scope of the study spanned from June 2024 to November-2025. Methodology: Primary data were collected through structured questionnaires administered to 58 registered microfinance institutions selected via random and convenience sampling. Variables included board chair independence, financial expertise, and duration of service as independent variables, with financial reporting quality (measured by timeliness, compliance, and accuracy) as the dependent variable. Binary logistic regression was used to analyze the relationship between these variables. Results: Based on a sample of 58 MFIs, the logistic regression revealed that board chair independence had a negative and statistically insignificant effect on reporting quality (B = -1.130, p = 0.601). Conversely, board chair financial expertise showed a positive and marginally significant effect at the 10% level (B = 1.618, p = 0.093), with an odds ratio suggesting that institutions with expert chairs are over five times more likely to produce quality reports (Exp(B) = 5.042). Board chair duration of service yielded mixed results: the 3-6 years category had a weak positive relationship (B = 0.530, p = 0.591), while the 9+ years category showed a negative, non-significant trend (B = -3.249, p = 0.162). Conclusion: The study concludes that in an unstable environment, the technical competence (financial expertise) of a board chair is a more critical determinant of financial reporting quality than mere independence. While independence showed no significant impact, the presence of a financially literate chair significantly enhances the likelihood of high-quality reporting. Furthermore, the findings suggest that prolonged board chair tenure may eventually become detrimental to oversight. Therefore, MFIs should prioritize financial literacy and consider leadership renewal policies to ensure transparent and accountable financial reporting.