Corporate Governance, Fundraising and Operational Efficiency of Non-Governmental Organizations in Ghana

Abstract

Corporate governance (CG) literature implicitly assumes that profit making organizations are the subject of analysis, as a result of the stress placed on them in CG literature. However, the findings in the profit making organizations cannot be replicated in the non-profit organizations due to the differences in the motives of existence. Various studies that have been conducted in the NGO setting tend to implicitly associate their governance narrowly to the boards, often to the neglect of the wider governance system. This has led to little emphasis on the wider CG mechanisms and its effect on organizational efficiency, especially in a developing economy, such as Ghana, where there have been calls for further understanding in their governance frameworks. Therefore, this study sought to assess the effect of CG mechanisms on the amount of funds raised and operational efficiency, as measured by technical efficiency (TE), allocative efficiency (AE) and liquidity. Additionally, the influence of the operational efficiency of NGOs on the amount of funds raised was assessed. Panel data for NGOs operating in Ghana over the period of 2009- 2013, available at the Department of Social Welfare, resulting in a sample of 146 NGO-year, data was analysed using the ordinary least squares (OLS) regression. The findings of this study indicate that NGOs which put in place CG mechanisms such as CEO- Duality and employ the services of a BIG-4 audit firm leads to the NGO raising more funds. The results also show that gender diversity and the separation between CEO/Executive Director ensure quality in the monitoring role the board plays leading to technical efficiency of the board. Additionally, the operational efficiency of the NGO has an impact on the amount of funds it is able to raise. This study responds to the calls to increase the minimal corporate governance literature on NGOs in a developing economy, and goes further to show how the wider CG mechanisms affect their operational efficiency and the amount of funds raised.