Membership Structure and Dividend Payout Policies at Hungarian Cooperative Banks

17 Pages Posted: 26 Dec 2011 Last revised: 7 Mar 2012

See all articles by Dr. Csaba Burger

Dr. Csaba Burger

University of Oxford - Saint Peter's College Oxford

Date Written: March 7, 2012


Cooperative banks are widely seen as sustainable alternatives to profit-driven banking. However, while most banks struggle to meet the stringent capital requirements of regulators, cooperative banks are in particular need of cautious capital-related decisions given their little ability to accommodate profit-driven equity investors. In fact, cooperative banks’ single greatest source of capital is their annual surplus.

This paper first highlights that capital protection rules related to Hungarian cooperative banks are more liberal than of other European cooperatives. This step is then followed by an analysis of Hungarian cooperative banks’ decisions on the distribution of annual surplus among their members. In doing so, the annual reports of 99 cooperative banks representing 73 percent of all Hungarian cooperatives are used, complemented with confidential data on the ownership structure of each cooperative.

The study shows that a cooperative with low number of members and high amount of average subscribed capital per member are likely to distribute high dividends. This phenomenon is explained by the different nature of cooperatives according to their number of members. This result not only sends an alarming message to policy makers in Hungary and possibly elsewhere, but also contributes to the peculiarities of cooperative corporate governance.

Keywords: cooperative, banking, corporate governance, ownership structure, dividend payout policy, finance, Hungary, takarékszövetkezet

JEL Classification: G21, G31, G34, L31, P13, R51

Suggested Citation

Burger, Csaba, Membership Structure and Dividend Payout Policies at Hungarian Cooperative Banks (March 7, 2012). Available at SSRN: or

Csaba Burger (Contact Author)

University of Oxford - Saint Peter's College Oxford ( email )

New Inn Hall Street
Oxford, Oxfordshire OX1 2DL
United Kingdom

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