U.S. Savings Banks' Demutualization and Depositor Welfare
50 Pages Posted: 4 Nov 2015 Last revised: 27 Jul 2017
Date Written: July 26, 2017
Originally, U.S. savings banks were owned by their depositors. In recent decades, many savings banks have “demutualized”, by converting from customer to investor ownership. We examine the implications of such events for depositor welfare. We introduce a random coefficients logit model of bank account choice and estimate depositors' tastes for bank characteristics (including banks' ownership type). We then measure the effect on depositor welfare of a simulated demutualization of all customer-owned savings banks. We find that depositors' welfare would increase on average. In particular, if demutualized savings banks offered a deposit rate in line with existing demutualized banks, each depositor would gain $1.14 annually, for a total of $22 million for each state and year.
Keywords: Banks, Deposits, Demand Estimation, Customer Ownership, Mutuals
JEL Classification: D12, G21, L21, P13.
Suggested Citation: Suggested Citation