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Capital Accumulation and Deposit Pricing in Mutual Financial Institutions

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  • Deshmukh, Sudhakar D.
  • Greenbaum, Stuart I.
  • Thakor, Anjan V.

Abstract

This paper presents a multiperiod model of a deposit-type mutual financial institution and analyzes the manager's capital accumulation and deposit pricing decisions under uncertainty. The model is meant to describe a mutual savings and loan association (SLA) or a credit union in which there are no stockholders and nominal ownership is widely diffused (see [12] and [14]). The resulting paucity of monitoring gives rise to an agency problem (see [13]) in which the manager maximizes his multiperiod expected discounted utility with minimal intervention from nominal owners.

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  • Deshmukh, Sudhakar D. & Greenbaum, Stuart I. & Thakor, Anjan V., 1982. "Capital Accumulation and Deposit Pricing in Mutual Financial Institutions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 17(5), pages 705-725, December.
    • Handle: RePEc:cup:jfinqa:v:17:y:1982:i:05:p:705-725_01
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    References listed on IDEAS

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    1. Halloran, John A, 1979. "A Note on the Impact of FHLB Advances on the Cost and Availability of Funds at S&Ls," Journal of Finance, American Finance Association, vol. 34(5), pages 1255-1261, December.
    2. Timothy H. Hannan & Ferdinand Mavinga, 1980. "Expense Preference and Managerial Control: the Case of the Banking Firm," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 671-682, Autumn.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Hannan, Timothy H, 1979. "Expense-Preference Behavior in Banking: A Reexamination," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 891-895, August.
    5. Goldfeld, Stephen M & Jaffee, Dwight M, 1970. "The Determinants of Deposit-Rate Setting by Savings and Loan Associations," Journal of Finance, American Finance Association, vol. 25(3), pages 615-632, June.
    6. Hakansson, Nils H, 1970. "Optimal Investment and Consumption Strategies Under Risk for a Class of Utility Functions," Econometrica, Econometric Society, vol. 38(5), pages 587-607, September.
    7. Jolivet, Vincent M., 1966. "The Control of Savings and Loan Associations," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 1(4), pages 58-71, December.
    8. Baltensperger, Ernst, 1980. "Alternative approaches to the theory of the banking firm," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 1-37, January.
    9. Sherman J. Maisel, 1981. "Risk and Capital Adequacy in Commercial Banks," NBER Books, National Bureau of Economic Research, Inc, number mais81-1, March.
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    Cited by:

    1. Kevin Davis, 1994. "Prudential Regulation and Australian Credit Unions," Australian Journal of Management, Australian School of Business, vol. 19(1), pages 31-46, June.
    2. Butzbach Olivier & von Mettenheim Kurt E., 2015. "Alternative Banking and Theory," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 5(2), pages 105-171, July.
    3. Brown, Christine & Davis, Kevin, 2009. "Capital management in mutual financial institutions," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 443-455, March.
    4. Forker, John & Ward, Anne Marie, 2012. "Prudence and financial self-regulation in credit unions in Northern Ireland," The British Accounting Review, Elsevier, vol. 44(4), pages 221-234.
    5. Mireille Jaeger, 2000. "Vente à perte dans le secteur bancaire et avantage concurrentiel des banques mutuelles et coopératives," Revue d'Économie Financière, Programme National Persée, vol. 56(1), pages 195-216.
    6. Mr. Wim Fonteyne, 2007. "Cooperative Banks in Europe—Policy Issues," IMF Working Papers 2007/159, International Monetary Fund.
    7. Goddard, John & McKillop, Donal G. & Wilson, John O.S., 2023. "Who consumes the credit union subsidies?," Journal of Financial Stability, Elsevier, vol. 69(C).

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