Brazilian credit union member groups: borrower-dominated, saver-dominated or neutral behavior?

Abstract

Theoretical models concerning Credit Unions (CUs) suggest that the type of CU domination determines the way it allocates the monetary value it generates. A borrower-(saver-) dominated CU benefits borrower (saver) members at the expenses of saver (borrower) members, and a neutral CU equally benefits its member groups. This paper applies direct measure of monetary benefits to each member group (Patin & McNiel, 1991a) to test for the existence of dominated behavior in Brazilian CUs, and is the first to apply panel data regressions to identify the determinants of CUs behavior. We use a unique panel data with 40,664 observations taken from 533 CUs affiliated with the largest Brazilian cooperative network. Results indicate Brazilian CUs are dominated by borrowers, but behave close to neutrality. Panel regression estimates show that common or multiple bond type, size and overdue loans of a CU have no effect on its behavior, the greater the total amount of loans over social capital and adjusted equity over total assets are the more likely a CU is borrower dominated, and the greater the age and current operational expenses over total asset of a CU are the more likely a CU is saver dominated.

Exit and Failure of Credit Unions in Brazil: A Risk Analysis

“…The findings of this article indicate a positive relation between Banking Margin and the probability of discontinuity (A and B) that is in accordance with Bressan et al (2013). However, this variable was not significant in relation to "extrajudicial liquidation and judicial liquidation".…”

“…According to Bressan et al (2013), a negative relation between margin and the probability of insolvency of credit unions should be expected, but their research showed a positive relation between these variables. The findings of this article indicate a positive relation between Banking Margin and the probability of discontinuity (A and B) that is in accordance with Bressan et al (2013).…”

“…According and savers seeking satisfactory dividend rates (Spencer, 1996). Bressan, Braga, Resende Filho and Bressan (2013) investigated whether the characteristics of members that dominate a credit union determine the way it allocates monetary value.…”

Credit Union Member Group Domination Under High Interest Rate Environments

“…Other authors have supported this finding (Bressan et al. ; Catturani and Venkat ; Leggett and Stewart ; Siudek and Zawojska ). However, this does not mean that CUs are not concerned with positive financial results, once they are challenged to remain solvent and competitive in the financial market (Carvalho et al.…”

“…Seen from this perspective, borrowers prefer lower interest rates on loans, while savers seek higher interest rates on savings (Bauer ; Bressan et al. ; Carvalho et al. ; Croteau ; McKillop and Wilson ; Smith et al.…”