Detecting abnormal credit union performance

Bauer, Keldon

doi:10.1016/j.jbankfin.2007.04.022

Cited by 51 publications

(45 citation statements)

References 28 publications

(23 reference statements)

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“…One can naturally expect a larger credit union to seek the diversification of its output mix and thus switch to a less specialized technology. We proxy the credit union's potential for growth using the reported level of reserves (Bauer, 2008;Bauer et al, 2009) and the size of the field of membership, i.e., the number of potential members (Goddard et al, 2008). The intuition here is as follows.…”

Section: A Generalized Frameworkmentioning

confidence: 99%

Heterogeneous credit union production technologies with endogenous switching and correlated effects

Malikov

Restrepo-Tobón

Kumbhakar

2016

Econometric Reviews

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Credit unions differ in the types of financial services they offer to their members. This paper explicitly models this observed heterogeneity using a generalized model of endogenous ordered switching. Our approach captures the endogenous choice that credit unions make when adding new products to their financial services mix. The model that we consider also allows for the dependence between unobserved effects and regressors in both the selection and outcome equations and can accommodate the presence of predetermined covariates in the model. We use this model to estimate returns to scale for U.S. retail credit unions from 1996 to 2011. We document strong evidence of persistent technological heterogeneity among credit unions offering different financial service mixes, which, if ignored, can produce quite misleading results. Employing our model, we find that credit unions of all types exhibit substantial economies of scale.Keywords: Credit Unions, Correlated Effects, Ordered Choice, Panel Data, Production, Returns to Scale, Switching Regression JEL Classification: C33, C34, D24, G21 * Email : emalikov@stlawu.edu (Malikov), drestr16@eafit.edu.co (Restrepo), kkar@binghamton.edu (Kumbhakar).We would like to thank the editor, the associate editor and two anonymous referees for many insightful comments and suggestions that helped improve this article. We are also thankful to Alfonso Flores-Lagunes, Thierry Magnac, Dave Wheelock, Jeff Wooldridge and seminar participants at Syracuse University, University at Albany, Federal Reserve Bank of Dallas and the 2013 Midwest Econometrics Group Meeting at Indiana University Bloomington for many helpful comments and suggestions. Any remaining errors are our own. We also gratefully acknowledge the technical assistance from the Center for Scientific Computation APOLO at EAFIT University in setting up the cluster we used for the estimation. Restrepo-Tobón acknowledges financial support from the Colombian Administrative Department of Sciences, Technology and Innovation, Colombian Fulbright Commission and EAFIT University. The original version of this paper was circulated under the title "Are All U.S. Credit Unions Alike? A Generalized Model of Heterogeneous Technologies with Endogenous Switching and Correlated Effects".

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Section: A Generalized Frameworkmentioning

confidence: 99%

Heterogeneous credit union production technologies with endogenous switching and correlated effects

Malikov

Restrepo-Tobón

Kumbhakar

2016

Econometric Reviews

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“…Surpluses or profits are returned to members in the form of reinvestment in the credit union, dividends to members, or lower interest rates on loan products (Bauer, 2007). Each credit union is governed by its members, who elect (from within the membership) unpaid volunteer officers and directors to determine the policies under which the credit union operates.…”

Section: The Us Credit Union Sectormentioning

confidence: 99%

“…The ultimate owners of the credit union are its members, who in principle may receive a return on their stake through either below-market rates charged on loans to borrowers, or above-market rates paid in the form of interest or dividends on the deposits of savers. Retained earnings which increase the credit union's capital also increase its future capacity to offer its members subsidies of this kind (Wilcox, 2006a;Bauer, 2007). Therefore the net earnings figure that enters the numerators of the ROA and ROE indicators is in certain respects analogous to the retained profit figure of a bank that is financed by shareholder equity.…”

Section: Hhimentioning

confidence: 99%

The diversification and financial performance of US credit unions

Goddard

McKillop

Wilson

2008

Journal of Banking & Finance

238

150

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“…The data seem to suggest that the variables capturing a credit union's size, financial strength and potential for growth may be particularly relevant to a choice of the service menu. A careful examination of the credit union literature suggests considering the following variables: the number of current and potential members, equity capital, 25 reserves and the leverage ratio, defined as the ratio of total debt to total assets (Bauer, 2008;Bauer et al, 2009;Goddard et al, 2002Goddard et al, , 2008. 26 These are the variables entering the selection equations.…”

Section: Framework and Data Descriptionmentioning

confidence: 99%

Varying coefficient panel data model in the presence of endogenous selectivity and fixed effects

Malikov

Kumbhakar

Sun

2016

Journal of Econometrics

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This paper considers a flexible panel data sample selection model in which (i) the outcome equation is permitted to take a semiparametric, varying coefficient form to capture potential parameter heterogeneity in the relationship of interest, (ii) both the outcome and (parametric) selection equations contain unobserved fixed effects and (iii) selection is generalized to a polychotomous case. We propose a two-stage estimator. Given consistent parameter estimates from the selection equation obtained in the first stage, we estimate the semiparametric outcome equation using data for the observed individuals whose likelihood of being selected into the sample stays approximately the same over time. The selection bias term is then "asymptotically" removed from the equation along with fixed effects using kernel-based weights. The proposed estimator is consistent and asymptotically normal. We first investigate the finite sample properties of the estimator in a small Monte Carlo study and then apply it to study production technologies of U.S. retail credit unions from 2002 to 2006.

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Detecting abnormal credit union performance

Cited by 51 publications

References 28 publications

Heterogeneous credit union production technologies with endogenous switching and correlated effects

Heterogeneous credit union production technologies with endogenous switching and correlated effects

The diversification and financial performance of US credit unions

Varying coefficient panel data model in the presence of endogenous selectivity and fixed effects

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