The impact of differing operating environments on US Credit Union Performance, 1993-2001
Today US credit unions operate within a highly competitive financial market place. Set against this competitive operating environment, the present study employs stochastic frontier analysis to evaluate the performance of large credit unions (assets greater than $50 million) over the period 1993 to 2001. Although credit unions may share a common co-operative philosophy, differences between credit unions are also apparent across a range of operational, structural and locational characteristics (environmental conditions). The impact of these different environmental influences is modelled in two ways. One assumes that environmental factors affect the efficiency with which the production process is operated, while the second assumes that the environment affects the production process itself. Net and gross cost efficiency measures are obtained for both models, with the differences between these measures for a specific credit union being viewed as the impact that environmental variables have on the inefficiency of that credit union. In addition, if it is assumed that the main environmental factors are accounted for in the modelling, then a credit union's net efficiency measure may be interpreted as a measure of managerial performance when operating in equivalent environments. The analysis revealed that different environments (the age of the credit union; the potential for expansion within the existing common bond; whether the credit union has the option of expansion through the addition of select employee groups; whether the credit union is state or federally regulated; whether insurance is provided at state or federal level; as well as regional characteristics such as per capita income and the level of unemployment) account for much of the variability in cost efficiency between credit unions and once credit unions are placed in broadly equivalent operating environments only marginal differences are apparent in their managerial performance.
Volume (Year): 16 (2006)
Issue (Month): 17 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Esho, Neil, 2001. "The determinants of cost efficiency in cooperative financial institutions: Australian evidence," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 941-964, May.
- Ellene Kebede & Curtis Jolly, 2001. "Effects of financial structure and instruments on income of low income credit unions," Applied Financial Economics, Taylor & Francis Journals, vol. 11(2), pages 231-236.
- Janice Caudill & Steven Caudill & Daniel Gropper, 2001. "Charter status, ownership type and efficiency in the thrift industry," Applied Financial Economics, Taylor & Francis Journals, vol. 11(2), pages 147-155.
- Fried, Harold O. & Knox Lovell, C. A. & Eeckaut, Philippe Vanden, 1993. "Evaluating the performance of US credit unions," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 251-265, April.
- Aly, Hassan Y, et al, 1990. "Technical, Scale, and Allocative Efficiencies in U.S. Banking: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 211-18, May.
- Andrew Worthington, 1998. "The determinants of non-bank financial institution efficiency: a stochastic cost frontier approach," Applied Financial Economics, Taylor & Francis Journals, vol. 8(3), pages 279-287.
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:16:y:2006:i:17:p:1285-1300. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.