The Power of Networks: Integration and Financial Cooperative Performance
AbstractThe purpose of this paper is to perform a cross-country survey of the level of integration of systems of financial cooperatives (FC) and its effect on measures of performance. We develop a classification scheme based on a theoretical framework that builds on published work using transaction cost economics (TCE) to explain integration of large numbers of financial cooperatives into networks. We identify three critical level of increasing integration we call respectively atomized systems, consensual networks and strategic networks. Further, we test some of the propositions that result from the theoretical framework on an international sample of financial cooperative systems. Based on this analysis we can conclude that: i) Integration is less (more) important is developing (more developed) countries and for very small (large) financial cooperatives as a determinant of efficiency. However, integration tends to reduce volatility of efficiency and performance regardless of development. ii) Integration appears to help control measure of managers' expense preferences that tend to affect performance of FC. iii) Despite high costs of running hub-like organizations in highly integrated system, these systems economize in bounded rationality and operate at lower costs that less integrated systems.
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Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 0514.
Date of creation: 2005
Date of revision:
Transaction cost economics; financial cooperatives; credit unions; networks; corporate governance; technical efficiency; x-efficiency;
Other versions of this item:
- Martin Desrochers & Klaus P. Fischer, 2005. "The Power of Networks: Integration and Financial Cooperative Performance," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(3), pages 307-354, 09.
- G2 - Financial Economics - - Financial Institutions and Services
- G3 - Financial Economics - - Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-14 (All new papers)
- NEP-FIN-2005-06-14 (Finance)
- NEP-FMK-2005-06-14 (Financial Markets)
- NEP-NET-2005-06-14 (Network Economics)
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