U.S. Savings Banks' Demutualization and Depositor Welfare

52 Pages Posted: 7 Sep 2017

See all articles by Mattia Girotti

Mattia Girotti

Banque de France

Richard Meade

Auckland University of Technology

Multiple version iconThere are 2 versions of this paper

Date Written: August 2017

Abstract

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

Girotti, Mattia and Meade, Richard, U.S. Savings Banks' Demutualization and Depositor Welfare (August 2017). Banque de France Working Paper No. 639. Available at SSRN: https://ssrn.com/abstract=3032304 or http://dx.doi.org/10.2139/ssrn.3032304

Mattia Girotti (Contact Author)

Banque de France ( email )

Paris
France

Richard Meade

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

HOME PAGE: http://www.aut.ac.nz/profiles/richard-meade

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