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A Comparison of Financial Performance of Czech Credit Unions and European Cooperative Banks

Author

Listed:
  • Matej Kuc

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)

  • Petr Teply

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)

Abstract

Czech credit unions have been yet criticized by both academics and regulatory representatives for its business based on moral hazard and excessive risk taking. This paper empirically assesses financial performance of Czech credit unions in relation with other European cooperative banks in terms of profitability and stability. To do that, we created a unique dataset of 283 cooperative banks from 15 European countries in the 2006–2013 period. System GMM method is employed as a main instrument of our empirical analysis and alternative panel data methods are used as supplementary techniques. Results revealed poor performance of Czech credit unions in terms of both profitability and stability. Moreover, adverse trends in stability measures of Czech credit unions are in sharp contrast to the tendencies in the rest of cooperative banks in our sample. To conclude, we argue that bigger Czech credit unions will face serious financial problems in coming years.

Suggested Citation

  • Matej Kuc & Petr Teply, 2015. "A Comparison of Financial Performance of Czech Credit Unions and European Cooperative Banks," Working Papers IES 2015/18, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2015.
    • Handle: RePEc:fau:wpaper:wp2015_18
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/5327/lang/cs
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    More about this item

    Keywords

    credit union; cooperative banking; financial statements; moral hazard; credit risk; system GMM; Z-score;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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