Pricing and dividend policies in open credit cooperatives
AbstractThis paper develops an integrated model of pricing and dividend policies in open credit cooperatives (those that do business with members and non-members on a non-discriminatory basis). We show that both the distribution of member preferences and the amount of non-member business the cooperative does influence its optimal pricing and dividend policies. For a fixed distribution of member preferences, the larger the fraction of business done by members, the smaller the optimal dividend and the larger the optimal pricing subsidy (hence, increasing demand). On the other hand, for a fixed fraction of member business, the greater the skewness of member preferences toward loan (deposit) business with the credit cooperative, the larger the optimal dividend and the higher (lower) the optimal loan (deposit) interest rate. Aggregate empirical evidence from the German cooperative banking sector supports a version of the latter prediction, namely, that in an increasingly depositor-dominated open credit cooperative, average deposit rates tend to fall as dividend payouts rise.
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Bibliographic InfoPaper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2000-008.
Date of creation: 2000
Date of revision:
Publication status: Published in Journal of Theoretical and Institutional Economics, June 2002, 158(2), pp. 234-55
Other versions of this item:
- William R. Emmons & Frank A. Schmid, 2002. "Pricing and Dividend Policies in Open Credit Cooperatives," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(2), pages 234-, June.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
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