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Mutuality and Corporate Governance: The Evolution of UK Building Societies Following Deregulation

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Listed author(s):
  • J.Cook
  • S.Deakin
  • A.Hughes

Abstract

This paper studies the effects of deregulation following the UK Building Societies Act 1986, which opened the way for competition between building societies and commercial banks and introduced a procedure for the demutualisation of a building society. it is argued that the Act brought about a rearrangement of property rights which destabilised the building society form. A wave of demutualisations followed in the 1990's. the beneficiaries of change included corporate managers whose earnings and status were enhanced following conversion, and speculative investors who profitted from windfall gains. These were set against losses to borrowers, in the form of higher costs of loans, and to communities, in the form of reduced diversity of services. There is no guarentee that the recent trajectory of the sector is one of evolution to efficiency. Rather, its experience illustrates the often enexpected consequences for corporate governance of changes in regulation and property rights.

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Paper provided by Centre for Business Research, University of Cambridge in its series Working Papers with number wp205.

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Date of creation: Jun 2001
Handle: RePEc:cbr:cbrwps:wp205
Note: PRO-2
Contact details of provider: Web page: http://www.cbr.cam.ac.uk

Keywords: corporate governance; deregulation; mutuality; property rights; building societies; demutualisation; path dependence.;

Find related papers by JEL classification:

  • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
  • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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  12. David T LLEWELLYN & Mark J HOLMES, 1991. "In Defence Of Mutuality: A Redress To An Emerging Conventional Wisdom," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 62(3), pages 319-354, 07.
  13. Hilary Ingham & Steve Thompson, 1994. "Paying for performance: Efficiency wages and mutuality," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 279-289, July/Augu.
  14. J. David Cummins & Mary A. Weiss & Hongmin Zi, 1999. "Organizational Form and Efficiency: The Coexistence of Stock and Mutual Property-Liability Insurers," Management Science, INFORMS, vol. 45(9), pages 1254-1269, September.
  15. Mayers, David & Shivdasani, Anil & Smith, Clifford W, Jr, 1997. "Board Composition and Corporate Control: Evidence from the Insurance Industry," The Journal of Business, University of Chicago Press, vol. 70(1), pages 33-62, January.
  16. Ingham, Hilary & Thompson, Steve, 1995. "Mutuality, Performance and Executive Compensation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 295-308, August.
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Cited by:

  1. Jean-Noël Ory & Mireille Jaeger & Emmanuelle Gurtner, 2006. "La banque à forme coopérative peut-elle soutenir durablement la compétition avec la banque SA?," Revue Finance Contrôle Stratégie, revues.org, vol. 9(2), pages 121-157, June.

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