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Governance, Reforms and Crowding out Risk in Italian CCBs

Author

Listed:
  • Virginia Cecchini Manara

    (University of Trento)

  • Lorenzo Sacconi

    (University of Milan)

Abstract

The Italian reform of Cooperative Banks (legislative decree 18/2016 converted into law 49/2016) was created to address the main structural and economic difficulties that the Italian cooperative credit sector is facing. This work intends to evaluate the impact of the reform and to warn against the risk that it could intervene negatively on the fundamental values of cooperative credit (mutuality, localism and solidarity within the community to which it belongs), without taking into account the non-profit multi-stakeholder nature and of the cooperative banks (BCC: Banche di Credito Cooperativo). In the proposed model, the study of the non-material motivational component of the subjects, which in this work is identified in conformity preferences, assumes a central importance. The emergence of “virtuous†behavior in this context can be explained as the equilibrium outcome of a game in which players do not act solely pursuing self-interest, but also and above all as individuals belonging to the same community that shares ideal principles on the equitable sharing of wealth. However, because the intrinsic motivations are fundamental but also fragile, our study of the effects of the reform mainly focused on the risk that such intervention might alter or even oust the intrinsic motivations of the subjects (crowding-out effect), threatening the stability of the motivational system that guarantees the existence of the BCCs. The purpose of this work is to investigate whether a large-scale legislative intervention, such as the recent reform of the BCC, could end up altering the essential characteristics of the cooperative credit system, putting its integrity and uniqueness at risk. Starting from a descriptive model of the BCCs in a context of interaction among different stakeholders, characterized by motivations of conformity to an ideal (conformity preferences - Grimalda and Sacconi, 2005), various ways of external intervention are hypothesized and the risk of crowding out of the intrinsic motivations of individuals (Frey, 1997) is analyzed.

Suggested Citation

  • Virginia Cecchini Manara & Lorenzo Sacconi, 2019. "Governance, Reforms and Crowding out Risk in Italian CCBs," Econometica Working Papers wp72, Econometica.
    • Handle: RePEc:ent:wpaper:wp72
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    cooperative banks; institutional diversity; fairness; psychological games; intrinsic motivations; corporate governance;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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