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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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File URL: https://www.cbr.cam.ac.uk/fileadmin/user_upload/centre-for-business-research/downloads/working-papers/wp205.pdf
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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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  7. Luigi Zingales, 1997. "Corporate Governance," NBER Working Papers 6309, National Bureau of Economic Research, Inc.
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  14. Patricia Born & William M. Gentry & W. Kip Viscusi & Richard J. Zeckhauser, 1998. "Organizational Form and Insurance Company Performance: Stocks versus Mutuals," NBER Chapters,in: The Economics of Property-Casualty Insurance, pages 167-192 National Bureau of Economic Research, Inc.
  15. 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.
  16. 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.
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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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