Customer Friendly Finance

35 Pages Posted: 1 Apr 2016

See all articles by Jordan Martel

Jordan Martel

Indiana University Bloomington, Kelley School of Business

Date Written: March 28, 2016


In the United States, customer owned firms are responsible for 35% of consumer insurance and 10% of consumer banking, yet receive little theoretical or empirical attention. In this paper, I propose a theory of internal finance for the customer owned firm. I show that its growth, pricing, and capital structure are tied together: higher sales tomorrow are achieved through higher prices today and lower leverage today. This result does not hold for a shareholder owned firm. I document stylized facts from the credit union industry and find that they are consistent with the theory's predictions. I discuss empirical implications for other customer owned firms, such as mutual insurance companies and agricultural credit associations.

Keywords: Internal Finance, Consumer Cooperatives, Financial Institutions

JEL Classification: G21, G22, G30, G32, L12, L21

Suggested Citation

Martel, Jordan, Customer Friendly Finance (March 28, 2016). Available at SSRN: or

Jordan Martel (Contact Author)

Indiana University Bloomington, Kelley School of Business ( email )


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